New GST regime will be consumer-centric, says Centre

In-News : New GST Regime to Be Consumer-Centric, Focus on Simplification and Equity

Analysis:

1. Objective of Reform:
   • Simplify the GST structure with fewer tax slabs.
   • Make the system more consumer-friendly and equitable.
2. Key Features:
   • Introduction of a two-tier GST system: 5% for essential items and 18% for most goods/services.
   • Items currently under 28% slab to be moved to 18%.
   • “Sin goods” (like tobacco) may face a higher rate of 40%.
3. Target Beneficiaries:
   • Consumers, especially the poor and middle class.
   • Farmers and MSMEs.
   • Overall, businesses benefit from reduced compliance complexity.
4. Revenue Implications:
   • Short-term revenue dip expected due to lower rates on several items.
   • Long-term revenue stability anticipated through improved compliance and expanded consumption base.
5. Institutional Coordination:
   • GST Council approval required for changes.
   • Cooperation between Centre and States crucial for smooth implementation.
6. Phasing Out Compensation Cess:
   • Compensation cess to be gradually removed before its legal deadline.
   • Fiscal sustainability balanced through higher rates on sin goods.
7. Significance for Economy:
   • Enhances ease of doing business.
   • Promotes consumption, economic growth, and consumer welfare.
   • Reflects lessons from 8 years of GST implementation.
     
     Updated : August 17, 2025 10:28 pm IST  | The Hindu