Most goods, services under GST to be in 5 per cent and 18 per cent slab

NEW DELHI: The Ministry of Finance has proposed restructuring of the existing system of Goods and Services Tax (GST) for ease of compliance, enhanced stability and better rate rationalization, confirmed sources from the Ministry. Additionally, to do away with the confusion and complications due to multiple GST rates levied on several goods and services, the centre has proposed to introduce a two-rate structure -- where the items will be classified as merit goods and de-merit goods. There will be two main slabs of 5 per cent and 18 per cent, with hardly five to seven items like tobacco, pan masala etc. falling under the sin good category. As of now, the rates on sin goods would remain unchanged. The Finance Ministry sources said, 99 per cent of the items which were previously under 12 per cent slab, will now be under 5 per cent slab. Centre has adopted a three-pillar approach to implement the structural change in the existing GST system. Three major areas of focus under this approach have been structural reform to address the challenges arising due to inverted duty structure, bring rate rationalization to do away with multiple tax rates and to ensure ease of compliance primarily for small and medium businesses. PM Modi announces GST reforms in I-Day speech, says 'substantial' rate cut by Diwali Group of Ministers (GoM) have analysed several sectors and consumer demand and understand the compliance complications. Most of the aspirational goods like TV, refrigerator, will come under 5 per cent and 18 per cent. The restructuring has been proposed keeping in mind the interest of the aspirational middle class, said the official source. According to the Finance Ministry, the restructuring aims to boost the core economic sectors like agriculture, textile, renewable energy, medical and health and insurance sectors. Lower GST rate on health and life insurance aims to bring relief to masses as this will enhance the public health sector and also help vulnerable sections come under insurance. Currently, a tax of 12 per cent and 18 per cent are levied on medicines and health products and on insurance respectively. Similarly, keeping in mind the interest of farmers and agricultural sectors, the rates have been brought down. Center believes that this reform will help boost consumption thereby having a positive impact on GDP.