Union Home Minister Amit Shah will soon begin discussions with state governments and Central ministries to speed up the process of simplifying India’s Goods and Services Tax (GST) system. The aim is to resolve ongoing disagreements and move forward on important changes, especially around the removal of the 12% tax slab.
Tweaks in GST structure not going to be easy
One big proposal is to remove the 12% GST rate completely. Items currently taxed at 12% may either be shifted to the lower 5% rate or the higher 18% rate. This change would make the tax system simpler, but it could also cause a loss of around Rs 70,000 to Rs 80,000 crore in revenue for both the central and state governments.
This has made many states—both those ruled by the BJP and those by the Opposition—hesitant to agree. Shah’s role will be to help build consensus among all parties before changes are proposed in the GST Council.
The Home Minister has already spoken with Finance Ministry officials and is expected to take a larger role since some of the pending issues are politically sensitive. In the past, Shah has been involved in other economic discussions like disinvestment and price rise of key food items.
GST was launched in July 2017 to unify India’s indirect tax system. However, it currently has five main slabs—0%, 5%, 12%, 18%, and 28%, plus additional cess charges on luxury and sin goods. Efforts to simplify the structure by reducing the number of slabs have been going on for over four years.
Some Opposition-ruled states have also demanded a cut in GST on life and health insurance premiums—from 18% to 5%—but the Council postponed a decision on this in its 55th meeting in December 2024.
According to 2023–24 data, most of the GST revenue (around 70–75%) comes from items taxed at 18%. Items in the 12% tax group bring in only 5–6%. The 5% and 28% tax groups contribute about 6–8% and 13–15% each.
If the 12% tax group is removed, it will affect many items like packaged food, furniture, medical supplies, and household goods. The plan is still being reviewed, and more talks will happen before anything is final.
