GST Council Simplifies Taxation: Two-Slab Structure Introduced
Context:
- The GST Council, in its 56th meeting, approved a simplified GST structure comprising two main slabs: 5% and 18%, with a special 40% rate for sin and luxury goods.
- This decision aims to rationalize taxation, ease compliance, reduce consumer cost burden, and enhance revenue collection.
About GST Council:
- Constitutional Basis: Established under Article 279A of the 101st Constitutional Amendment Act, 2016.
- Functions:
- Recommend GST rates, exemptions, and threshold limits.
- Resolve inverted duty structure issues.
- Suggest model GST laws and amendments.
- Decide special rates during natural disasters or emergencies.
- Ensure harmonization of GST between Centre and States.
- Composition:
- Chairperson: Union Finance Minister
- Members:
- Union Minister of State for Finance/Revenue
- Finance/Taxation Ministers of all States/UTs
- Governor-nominated representative in special cases (if President’s Rule is imposed)
- Quorum: Minimum 50% of total members must be present.
- Voting Procedure:
- Consensus preferred; if voting required:
- Union Government: 1/3 weightage
- States/UTs combined: 2/3 weightage
- Decision passes if ≥75% weighted votes are in favor.
- Consensus preferred; if voting required:
About Two-Slab GST Structure:
- Definition: Rationalization of GST into two main slabs (5% & 18%), plus a special 40% rate for sin and luxury goods.
- Objectives:
- Simplify compliance for businesses.
- Reduce cost burden on consumers, especially for essential items.
- Ensure equity: lower tax on essentials, higher tax on luxury/sin goods.
- Enhance revenue buoyancy and minimize leakages in the tax system.
- Significance:
- Promotes a transparent and business-friendly GST regime.
- Aligns taxation with progressive taxation principles, ensuring fairness in consumption-based taxes.
Conclusion:
- The new two-slab GST structure is a major step towards simplifying India’s indirect tax system.
- It balances economic efficiency, equity, and revenue needs, making GST easier to administer and comply with while protecting consumers from excessive taxation.
Source : mint
