The center proposed to reduce the number of boards within the tax system of goods and services, thus maintaining 5% and 18% of the board, according to official sources to introduce a lower level of concession below 1% and a high “measure of sin” 40% to only five to seven items.
This would mean completely removal with 12% and 28% of the tax belts. Of these, 99% of items will currently be moved to a 5% rate in a 12% board and 90% of the goods and services in the holder 28% will move to 18%. Above and above GST rates there will be no kind of any kind.
These reforms would be part of “Deepavali’s gift” from the center in the form of “new generation GST reform”, Prime Minister Narendra Modi announced during his speech on Independence in Delhi’s Red Fort on Friday. Reforms will reduce the “tax burden on an ordinary person”, he added.
“Of course there will be an income intervention, but it will not be so huge that it would significantly affect the fiscal deficit,” the official source said. “It believes that lower rates will increase consumption, reduce leaks and expand the tax network that will increase revenue by the end of the financial year.”
Up to the states
The Ministry of Finance said in a press release published soon after the speech that the Union’s government sent its proposal for the GST rationalization and reforms for a group of ministers (GOM) presented by the GST Council to explore this problem.
He added that the GST Council would be reflected in his next meeting – probably will be held in September or October, according to sources – on the recommendation of GOM and would try to perform most of the reforms in this financial year.
In the next few weeks, the center would be involved in the states to achieve a consensus about these reforms. The reason why the Center had to submit such a proposal in the first place was confirmed by the source, was that GOM authorized by the simplification of GST includes only representatives of the state.
“Although the center is part of the GST Council, it does not have a voice in terms of these changes, such as rationalization of rates or what will happen to the insurance,” the source explained. “So we had to present our GOM proposal.”
Now it is up to the states to accept or refuse the proposals, the source added.
The impact of income
According to sources, 28% of the tax board currently represents 11% of GST income, 12% of the album is 5% and 5% of the album represents 7% of income. Most income – approximately 67% – comes from 18% of the board.
The center also suggested that aspiration rates such as white goods will be reduced. Air conditioning is currently taxed to 28%, which will be seen, while other white goods that have currently taxed 18%could potentially see reduced rates. This includes daily use objects such as toothpaste, soap and shampoo.
“A few years ago, the Indian reserve bank calculated that the average GST rate in India settled at 11.6%, which will now fall significantly,” the sources explained. “The idea is that similar items will be taxed the same, so for example all namkeen (Savarieries) will be taxed at the same rate.”
They added that in the 40% category there would be only five to seven “sinful goods”, such as tobacco and gutka, while a preferential rate of less than 1% would apply to several items that are currently taxed below 5% or more than 0%. These include precious metals such as gold and silver (currently taxed to 3%) and semi -precious stones (currently taxed to 0.25%).
“Nothing has been added to this list of concessionaire items,” the source said.
Other reform
To support “easy life”, the center has been designed by technology to speed up and alleviate the GST registration process and implement in advance, reducing manual intervention and eliminating mismatch, while the return could be processed in a faster and more automated way.
“One of the more subsequent proposals in terms of ease of life is to correct the structure of reversed obligations for most of the goods, because this has led to problems with working capital,” the source explained.
The structure of the reversed obligation is when the tax rate of the product is lower than the tax rate of inputs that pass into its production. The government will pay the company for this inversion, but delay for any reason leads to the locking of the working capital of companies, which affects their ability to invest in a new business.
Published – August 15 2025 20:43
