{"id":48136,"date":"2025-07-14T20:48:35","date_gmt":"2025-07-14T15:18:35","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=48136"},"modified":"2025-07-24T15:11:58","modified_gmt":"2025-07-24T09:41:58","slug":"gst-reforms-rate-rationalisation-talks","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/14-07-2025\/gst-reforms-rate-rationalisation-talks","title":{"rendered":"GST Reforms: Home Minister to open talks for Consensus on Rate Rationalisation"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Union Home Minister is set to lead consultations with states and key central ministries to push forward<strong> long-pending reforms to the Goods and Services Tax (GST) structure.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Past Deliberations: In 2024,<\/strong> the Ministerial panel retained the <strong>12% slab<\/strong> despite detailed discussions, viewed as inconsistent with simplification goals.\n<ul class=\"wp-block-list\">\n<li><strong>55th GST Council Meeting: <\/strong>Deferred decision on lowering GST on health and life insurance premiums (currently at 18%).<\/li>\n\n\n\n<li>Two Opposition states demanded a reduction to 5%.<\/li>\n\n\n\n<li>Proposal to change GST rates on 148 items postponed for further study.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>&nbsp;Revenue Distribution (2023\u201324):<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>18% slab:<\/strong> 70\u201375% of GST revenue.<\/li>\n\n\n\n<li><strong>12% slab: <\/strong>5\u20136%.<\/li>\n\n\n\n<li><strong>5% slab:<\/strong> 6\u20138%.<\/li>\n\n\n\n<li><strong>28% slab:<\/strong> 13\u201315%.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Goods and Services Tax<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The GST was introduced in <strong>2017 <\/strong>by the <strong>101st Constitutional Amendment Act, <\/strong>2016 as a comprehensive indirect tax for the entire country.&nbsp;<\/li>\n\n\n\n<li>It is a destination based tax on <strong>consumption of goods and services.&nbsp;<\/strong><\/li>\n\n\n\n<li>It is levied at <strong>all stages <\/strong>right from manufacture up to final consumption.\n<ul class=\"wp-block-list\">\n<li><strong>Only value addition <\/strong>will be taxed and the burden of tax is to be borne by the final consumer.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>It accrues to the State or the Union Territory where the consumption takes place. It is of 3 types:\n<ul class=\"wp-block-list\">\n<li><strong>Central GST (CGST)<\/strong>: Levied by the Center.<\/li>\n\n\n\n<li><strong>State\/Union Territory GST (SGST\/UTGST)<\/strong>: Levied by States or UTs.<\/li>\n\n\n\n<li><strong>Integrated GST (IGST):<\/strong> Tax levied and collected by the Center on all inter-state supplies of goods and\/or services.\n<ul class=\"wp-block-list\">\n<li>The Center settles accounts with the States\/UTs by transferring the SGST\/UTGST portion of IGST to the destination state where goods\/services were consumed.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"aca7a1\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"384\" height=\"510\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/07\/Goods-and-Services-Tax-pic.webp\" alt=\"goods and services tax( gst)\" class=\"not-transparent wp-image-48152\" style=\"--dominant-color: #aca7a1; width:300px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/07\/Goods-and-Services-Tax-pic.webp 384w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/07\/Goods-and-Services-Tax-pic-226x300.webp 226w\" sizes=\"auto, (max-width: 384px) 100vw, 384px\" \/><\/figure>\n<\/div>\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Four slabs for taxes for both goods and services<\/strong>: 5%, 12%, 18%, and 28%.&nbsp;<\/li>\n\n\n\n<li>Different tax slabs were introduced because daily necessities could not be subject to the same rate as luxury items.<\/li>\n\n\n\n<li><strong>A cess<\/strong> is levied on the highest tax slab of 28% on luxury, sin and demerit goods.\n<ul class=\"wp-block-list\">\n<li>The collection from the cess goes to a separate corpus called Compensation fund. It is used to make up for revenue loss suffered by the state due to GST rollout.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>The GST Council <\/strong>is a constitutional body <strong>under Article 279A.<\/strong>\n<ul class=\"wp-block-list\">\n<li>It is a federal body comprising the Union Finance Minister as its Chairman and Finance Ministers of all States as members.<\/li>\n\n\n\n<li>The GST Council members take almost all decisions on <a href=\"https:\/\/www.nextias.com\/blog\/goods-and-services-tax-gst\/\">GST<\/a> with consensus.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Exempted Items:<\/strong> The GST applies to all goods other than alcoholic liquor for human consumption and five petroleum products (common for the Center and the States): petroleum crude, motor spirit (petrol), high speed diesel, natural gas, aviation turbine fuel.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Rate Rationalisation<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A key long-pending proposal is to eliminate the <strong>12% slab to move toward a simplified three-rate structure.<\/strong><\/li>\n\n\n\n<li><strong>The 12% slab currently includes items <\/strong>like packaged food (condensed milk, fruit juices), household goods (furniture, sewing machines), and medical supplies (diagnostic kits, bandages).<\/li>\n\n\n\n<li><strong>Items currently under the 12% slab would be shifted to either:<\/strong>\n<ul class=\"wp-block-list\">\n<li>5% slab (e.g., basic food and household items),<\/li>\n\n\n\n<li>or 18% slab (more revenue-generating items).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>This rationalisation aims to simplify GST structure, reduce classification disputes, and correct inverted duty structures.<\/li>\n\n\n\n<li><strong>Challenges:&nbsp;<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Estimated revenue loss<\/strong> of \u20b970,000\u2013\u20b980,000 crore if 12% slab is scrapped.<\/li>\n\n\n\n<li><strong>Strong resistance from states <\/strong>due to concerns over revenue losses and tax burden shifts.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Other Proposed Reforms:<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Expand GST Base: <\/strong>Include petroleum products, electricity, and real estate under GST to make it more comprehensive.\n<ul class=\"wp-block-list\">\n<li>Broaden the base to reduce the need for higher rates and improve tax buoyancy.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Improve GST Compliance &amp; Technology Use: <\/strong>Further strengthen e-invoicing, e-way bills, and GSTN infrastructure.\n<ul class=\"wp-block-list\">\n<li>Use AI and data analytics to detect tax evasion, fake invoices, and improve compliance monitoring.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Streamline Input Tax Credit (ITC) System: <\/strong>Ensure timely and seamless flow of ITC to reduce working capital blockage for businesses.\n<ul class=\"wp-block-list\">\n<li>Reduce complexity in ITC rules, make them more transparent and predictable.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Strengthen GST Council &amp; Cooperative Federalism: <\/strong>Enhance transparency and accountability in GST Council decisions.\n<ul class=\"wp-block-list\">\n<li>Ensure regular meetings and address states\u2019 concerns proactively.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Ahead:<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A three-rate GST structure is still under consideration.<\/li>\n\n\n\n<li>The GoM on rate rationalisation had sought <strong>more time to discuss the proposal<\/strong> to tweak rates on as many as 148 items, which is expected to come up for discussion in the next meeting of the GST Council.<\/li>\n\n\n\n<li>The road ahead for GST, apart from reducing rates is also focused towards <strong>bringing in more simplification<\/strong> in the law, <strong>ease the compliances<\/strong> and, later on <strong>bringing in more and more taxpayers<\/strong> under the formal economy, so that the entire system runs on an auto-pilot mode.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/business\/gst-reforms-home-minister-amit-shah-set-to-open-talks-for-consensus-on-rate-rationalisation-10124554\/\" rel=\"nofollow noopener\" target=\"_blank\"><strong>IE<\/strong><\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>Context<\/strong><\/h3>\n<li class=\"ms-5\">The Union Home Minister is set to lead consultations with states and key central ministries to push forward long-pending reforms to the Goods and Services Tax (GST) structure.<\/li>\n<p><\/p>\n<h3><strong>Rate Rationalisation<\/strong><\/h3>\n<li class=\"ms-5\">A key long-pending proposal is to eliminate the 12% slab to move toward a simplified three-rate structure.<\/li>\n<li class=\"ms-5\">The 12% slab currently includes items like packaged food (condensed milk, fruit juices), household goods (furniture, sewing machines), and medical supplies (diagnostic kits, bandages).<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/14-07-2025\/gst-reforms-rate-rationalisation-talks\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-48136","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/48136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=48136"}],"version-history":[{"count":5,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/48136\/revisions"}],"predecessor-version":[{"id":49054,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/48136\/revisions\/49054"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=48136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=48136"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=48136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}