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Informist, Friday, Aug. 15, 2025

NEW DELHI – The next-generation reforms in goods and services tax regime may lead to only two rate slabs with special rates only for select few items under the indirect tax. "The Central Government has sent its proposal on GST rate rationalisation and reforms to the Group of Ministers constituted by the GST Council to examine this issue," the finance ministry said in a post on social media platform X. Among the other suggestions, one is to move towards a simple tax with two slabs--standard and merit, the post said. 

The end of compensation cess has created a fiscal space, providing greater flexibility to rationalise and align tax rates within the GST framework for long-term sustainability, the ministry said on Friday. The government's proposed reforms are focused on three pillars, namely structural reforms, rate rationalisation and ease of living, a release said. 

Structural reforms proposed by the government will help in correcting Inverted duty structure, resolving classification issues and provide stability as well as predictability. Reforms will also help with seamless registration, smooth return filing and faster refund processing, the release said

GST Council, the apex decision-making body on the indirect tax, is working on rationalising the rate slabs for a number of years. The proposal to reduce the number of slabs from the current four--5%, 12%, 18%, and 28%--to three by merging 12% and 18% has been on the GST Council's table for a while. At the GST Council's last meeting in December, the rate rationalisation panel's interim report recommending rate tweaks on 148 items was deferred. Sitharaman had said at the time that Council members were of the view that more details need to be worked out before rate changes can be announced.

A six-member Group of Ministers has been asked to recommend trimming the list of items exempt from GST, reassess tax rates, and correct inverted duty structures. The Group of Ministers on rate rationalisation is headed by Bihar Deputy Chief Minister Samrat Choudhary. Kerala Finance Minister K.N. Balagopal, Uttar Pradesh Finance Minister Suresh Kumar Khanna, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya, and Rajasthan Medical and Health Services Minister Gajendra Singh are the other members.

In his Independence Day speech earlier in the day, Prime Minister Narendra Modi Friday said that the government was reviewing the indirect tax regime and next-generation reforms will be brought by Diwali. He said tax on regular-use items will be brought down significantly.  End

Reported by Sagar Sen

Edited by Akul Nishant Akhoury

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