Why in the news?

  • The Central Government has proposed reducing the number of slabs under the Goods and Services Tax system.

Existing GST Regime:

  • Goods and Services Tax is a form of Indirect Tax levied on most of the goods and services sold in India for domestic consumption.
  • GST was introduced in India to avoid the cascading effect of taxes.
  • It is a multistage, value added tax, which is also a destination based tax.
  • In the existing regime, GST had five tax slabs – 0%, 5%, 12%, 18% and 28%.

Proposed GST Regime:

  • These reforms would be part of a “Deepavali gift” from the Centre in the form of the “next-generation GST reforms”
  • Retains 5% and 18% tax slabs and slashes the 12% and 18% tax slabs.
  • Among the goods and services taxed under 12% slab, 99% of them are to be moved to the 5% tax slab.
  • Among the goods and services taxed under 28% tax slab, 90% of them are to be shifted to 18% tax slab.
  • Five among the seven sin goods categorised currently are to be taxed at 40%.
  • There will be no additional Cess over the GST charged.