While aimed at easing the burden on consumers and boosting demand, economists warn the move could cost Centre and states nearly ₹40,000 crore in revenue.
According to officials, the GST Council, chaired by Finance Minister Nirmala Sitharaman, is set to approve the new tax structure during its meeting on September 3 and 4, with a final review by the finance ministry scheduled for later in the month. The new system is likely to take effect by October 2, coinciding with Vijayadashami and Navratri celebrations.
Under the new scheme, GST will be simplified to just two rates—5% and 18%—replacing the existing four-tier system of 5%, 12%, 18% and 28%. The proposal has already received approval from the ministerial group, officials confirmed. The decision comes at a time when online gaming restrictions are already expected to reduce Centre and state revenues by nearly ₹20,000 crore each.
Economists argue that the removal of higher slabs will hurt state treasuries, which rely heavily on GST collections. However, finance ministry officials insist the restructuring is designed to ease the burden on the middle class and stimulate consumer demand. A senior official noted that the government had already raised the income tax exemption threshold to ₹12.5 lakh in the last budget, boosting disposable income. By cutting GST rates now, the Centre hopes to increase purchasing power and offset revenue losses through higher consumption.
Prime Minister Narendra Modi had announced in his Independence Day address that the government would deliver "good news for the people" around Diwali. The GST overhaul, officials said, is part of that promise to reduce the tax burden on households while laying the foundation for a stronger economic framework.
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