In a major move set to simplify India’s taxation system, the Group of Ministers (GoM) on Goods and Services Tax (GST) has approved the Centre’s proposal to shift to a two-slab GST structure of 5 percent and 18 percent, eliminating the current 12 percent and 28 percent rates. Bihar Deputy Chief Minister Samrat Choudhary, who convenes the six-member state ministerial panel on GST rate rationalisation, confirmed that the GoM has accepted both proposals after detailed deliberations.

Choudhary stated that the panel’s decision reflects broad support among the state ministers for reducing the complexity of GST and easing the compliance burden for businesses. According to him, the removal of the two middle slabs, 12 percent and 28 percent, will simplify taxation for citizens, traders, and micro, small, and medium enterprises (MSMEs).

In addition to the two main slabs, the panel endorsed a 40 percent GST on ultra-luxury and sin goods, including items such as tobacco, pan masala, and high-end vehicles, as proposed by the Centre. Uttar Pradesh Finance Minister Suresh Kumar Khanna highlighted that this special rate is aimed at discouraging consumption of harmful products while maintaining revenue collection.

However, some states are proposing additional measures to protect current tax revenue levels. West Bengal Finance Minister Chandrima Bhattacharya said her state intends to levy an extra tax on top of the 40 percent rate for ultra-luxury and sin goods to ensure that the overall tax incidence remains unchanged. She also raised concerns that the Centre’s proposal does not detail potential revenue losses for the Centre and state governments.

The current GST system includes four slabs: 5 percent, 12 percent, 18 percent, and 28 percent. While essential food items are taxed at 0 or 5 percent, luxury and demerit goods are taxed at 28 percent with an additional cess applied on products like high-end cars and other luxury items.