Simplified two-rate GST structure gets GoM’s nod , Pg1

Key Highlights:

• The GST Council's Group of Ministers (GoM) on Rate Rationalisation has accepted the Centre's proposal for a simplified two-rate GST structure.
• The proposal suggests eliminating the 12% and 28% GST slabs, retaining only the 5% and 18% slabs.
• 99% of items from the 12% slab would move to 5%, and 90% of items from the 28% slab would move to 18%.
• Sin goods like tobacco and online gaming may be moved to a higher 40% slab, without the compensation cess.
• The GST Council is expected to discuss and decide on the proposal in early September.

Detailed Insights:

• The Centre's proposal aims to reduce the tax burden on the common man through next-generation GST reforms.
• The GoM has recommended the proposal to the GST Council, which has the final authority to accept the changes.
• The Kerala Finance Minister suggested that the GST Council should discuss potential revenue loss for states and create a compensation mechanism.
• The proposed changes could significantly impact various sectors, depending on how goods and services are reclassified within the new rate structure.
• The removal of the compensation cess on items moved to the 40% slab could offset the impact of the higher tax rate on sin goods.

Key Concepts Involved:

• GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services.
• GST Council: A constitutional body responsible for making recommendations on GST-related issues.
• Compensation Cess: A levy imposed on certain goods to compensate states for revenue losses arising from the implementation of GST.