Rationalizing the Goods and Services Tax: A Three-Tier Rate Structure Under Consideration

Government officials from both central and state levels are exploring options to rationalize the Goods and Services Tax (GST) in India. According to sources, one of the primary considerations is implementing a three-tier GST rate structure. The proposed structure could feature rate slabs of either 8%, 16%, and 24% or 9%, 18%, and 27%. This restructuring aims to provide relief on essential goods while applying higher rates to luxury and sin goods like cigarettes, tobacco, and pan masala.

A government official mentioned, “We are currently in the discussion phase. The final recommendations will be submitted to the Group of Ministers (GoM) on rate rationalization.”

Business Today TV has reached out to the Ministry of Finance and the GST Secretariat for further details and will update the information once available.

The newly formed six-member GoM, established on July 2, 2024, is led by Samrat Chaudhary, Deputy Chief Minister of Bihar, as the convener. Other members include Suresh Khanna, Finance Minister of Uttar Pradesh; Gajendra Singh, Minister of Medical and Health Services; Chandrima Bhattacharya, Finance Minister of West Bengal; Krishna Gowda, Revenue Minister of Karnataka; and KN Balagopal, Finance Minister of Kerala.

The GoM is scheduled to convene for the first time ahead of the 54th GST Council meeting, expected in the third week of August.

CBIC Chairman Sanjay Kumar Agarwal, during a post-budget discussion with Business Today TV, stated, “The GoM is reviewing the GST rates to ensure that commodities are taxed at appropriate rates. The committee may also consider special rates for specific commodities. The objective is to evaluate whether the existing four-rate slab structure should be simplified.”

Union Finance Minister Nirmala Sitharaman commented after the previous GST Council meeting, “The GoM on rate rationalization has made significant progress. We will allow the new GoM time to assess and review recent updates. They will present a status report at the next meeting, where we will begin discussions on the rationalization process.”

Keywords: GST rate rationalization, three-tier GST structure, Goods and Services Tax, GST Council, tax slabs, essential goods, sin goods, CBIC Chairman Sanjay Kumar Agarwal, Finance Minister Nirmala Sitharaman, GoM on rate rationalization