कृपया इसे हिंदी में पढ़ने के लिए यहाँ क्लिक करें
In a landmark move aimed at simplifying India’s complex tax landscape, the government is set to eliminate the 12% Goods and Services Tax (GST) slab. This major overhaul, which has received an in-principle green signal from the Prime Minister’s Office (PMO), is the most significant reform in the GST structure since its nationwide implementation in 2017. The proposal is expected to be presented at the next GST Council meeting in August 2025, following the Parliament’s monsoon session.
This strategic shift is poised to streamline the current multi-layered tax system into a simpler, three-tiered structure, potentially easing the burden on both consumers and businesses.
A Brief Backstory: The Journey of GST
Launched on July 1, 2017, the GST regime was a monumental step towards a unified “One Nation, One Tax” system. It subsumed a host of indirect taxes like VAT, excise duty, and service tax into a single structure. However, it came with multiple slabs: 0%, 5%, 12%, 18%, and 28%, along with special rates for items like gold (3%) and precious stones (0.25%). Over the years, the GST Council, the apex decision-making body for GST, has frequently engaged in rejigging items between these slabs, a process that often proved complex and led to confusion.
Why Scrap the 12% Slab? The Rationale Behind the Reform
The decision to target the 12% slab is a calculated one, driven by several key factors:
- Simplification: The primary goal is to reduce the number of tax slabs, making the GST structure less confusing and more efficient for businesses to navigate.
- Reducing Disputes: Many items in the 12% bracket have overlapping characteristics with goods in the 5% and 18% slabs, leading to classification disputes and litigation. Eliminating this “middle slab” creates a clearer distinction between essential/mass-consumption goods and higher-end items.
- Political & Economic Feasibility: Altering the 12% slab is considered a more balanced approach. Drastically changing the 5% slab would significantly impact the poor, while modifying the 18% slab, which covers nearly 44% of all goods, could cause a major shock to government revenue.
What Happens Next? The Proposed New Structure
Under the new proposal, India will likely move to a three-slab structure consisting of 5%, 18%, and 28%. The items currently taxed at 12% will not become tax-free. Instead, they will be redistributed into the other slabs based on their nature:
- Moving to 5%: Essential or mass-consumption items currently in the 12% bracket are expected to be shifted down to the 5% slab. This could make products like ghee, butter, processed foods like snacks, fruit juices, and umbrellas cheaper for the end consumer.
- Moving to 18%: Relatively higher-end consumption items will be moved up to the 18% slab. This could include mobile phones (many are already partially at 18%), ready-made garments above ₹1,000, and household electronics, which might become more expensive.
The special rates of 0.25% and 3% are expected to remain untouched for now.
Impact Analysis: A Mixed Bag for All
This landmark reform will have a ripple effect across the economy:
- For Consumers: It’s a mixed bag. While some essential goods may become more affordable, certain consumer durables and other items could see a price hike.
- For Businesses: The move promises simpler input tax credit claims and fewer classification disputes. Micro, Small, and Medium Enterprises (MSMEs) may face less confusion regarding product pricing, boosting the Ease of Doing Business.
- For the Government: While there might be initial revenue volatility, the government anticipates a long-term increase in tax compliance and transparency. The Finance Ministry has already begun consultations with states to ensure any potential revenue dips are managed through compensation adjustments.
What About the Cess?
A compensation cess is currently levied on “sin goods” like tobacco, pan masala, and luxury items like large cars, which fall under the 28% slab. This was introduced to compensate states for revenue loss and has been extended until March 31, 2026, to repay loans taken during the pandemic. The future of this cess is also under review as part of the broader rationalization effort.
Social Message
A simplified and transparent tax system is the backbone of a robust economy. It fosters trust between the government and its citizens, encourages honest business practices, and ensures that the benefits of economic growth are shared more equitably. This reform is a step in that direction, aiming for a system that is easier to understand and comply with for everyone, from the smallest shop owner to the largest corporation.
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