New Delhi: The 56th GST Council meeting starts today at 11 am and will continue till September 4. The main agenda is the Group of Ministers’ (GoM) proposal to replace the current four-slab GST system (5%, 12%, 18%, 28% plus cess) with a simpler two-slab model of 5% and 18%.
Under this model, merit goods and services will attract 5% GST, while most standard goods will fall under 18%. However, a 40% sin tax will stay on limited items such as alcohol, tobacco, gambling, soft drinks, and fast food.
What Is a Sin Tax?
A sin tax is a levy on goods considered harmful to society. Governments use it to discourage consumption and reduce social damage.
Key Reforms Under Discussion
The Finance Ministry has outlined three major areas of reform. The first focus is on structural changes, which include correcting inverted duty structures to reduce excess input tax credits, resolving classification disputes to simplify compliance, and ensuring long-term rate stability to boost industry confidence. The second area is rate rationalisation, which aims to reduce taxes on essential and aspirational goods, cut down the number of slabs to just two, and make use of fiscal space created by the end of compensation cess for a more sustainable system. The third pillar covers ease of living and doing business, where reforms will focus on simplifying GST registration, offering pre-filled returns to avoid mismatches, and enabling faster, automated refunds for exporters and businesses hit by duty issues.
Why This Meeting Matters
PM Modi recently promised a “double Diwali” for citizens, signaling major economic announcements. According to the Finance Ministry, GST rationalisation can lower costs, enhance affordability, reduce disputes, and boost overall growth.
Therefore, the outcomes of this meeting could shape India’s next phase of tax reform.