The Indian government is mulling a comprehensive overhaul of its Goods and Services Tax (GST) system, proposing a simplified model with just three tax rates—5%, 18%, and 40% in a move that could reshape the country’s fiscal framework.
Streamlining The GST Framework
According to recent reports, the proposed reforms aim to move 99% of items currently taxed at 12% to the 5% bracket, and around 90% of goods in the 28% slab to 18%. Meanwhile, a steep 40% surcharge is suggested for luxury and sin goods.
What It Means For Consumers And Businesses
If implemented, this restructuring could significantly lower costs for everyday essentials, benefiting consumers while ensuring revenue stability with higher taxes on premium segments.
Simplified Structure:
- 5% bracket: Essentials and widely used goods
- 18% bracket: Standard items
- 40% bracket: Luxury and sin goods
Businesses could see reduced filing complexity and compliance costs. Consumers, especially those purchasing basic necessities, may welcome lower prices. However, corporations in higher-taxed sectors like alcohol and luxury retail might face margin pressure.
Rationale Behind The Shift
Tax experts suggest the reform reflects a balancing act, intensifying relief for average households while safeguarding government revenue through higher taxation on discretionary items. It’s aimed at increasing taxpayer compliance and easing the administrative burden on both businesses and authorities.
