GST Council May Scrape 12% GST Slab To Ease Burden On Middle Class: Report

The central government is reportedly exploring a major overhaul of the Goods and Services Tax (GST) structure in a move aimed at providing economic relief to India's middle and lower-income households. According to an NDTV report citing sources, the government may eliminate the 12 per cent GST slab entirely, reassigning many of the items currently taxed at that rate to the lower 5 per cent bracket.

Items Under Review

The proposed restructuring would benefit consumers of several everyday products such as toothpaste, tooth powder, umbrellas, bicycles, readymade garments priced above Rs 1,000, and footwear in the Rs 500–Rs 1,000 range. Household essentials like pressure cookers, kitchen utensils, sewing machines, geysers, electric irons, and small washing machines are also being considered for reclassification, as per the report.

Other items potentially impacted include school stationery like geometry boxes, exercise books, drawing books, and even diagnostic tools such as HIV and TB test kits. Affordable healthcare products, basic tiles, prefabricated structures, and agricultural tools like threshers could also see revised tax rates if the changes are approved, it added.

Fiscal Implications And Strategy

While the restructuring is expected to impose a short-term revenue hit between Rs 40,000 crore and Rs 50,000 crore, the government appears ready to absorb the impact. Officials in the report believe that lower prices on commonly used items will stimulate consumption, thereby expanding the tax base and leading to higher long-term GST revenues.

Despite the Centre’s push, the proposal faces roadblocks at the GST Council, where states must give their consent for any rate modifications. Resistance has been reported from states such as Kerala, Punjab, Madhya Pradesh, and West Bengal. Since GST's inception, the Council has typically operated by consensus, with only one vote ever held.

The issue is expected to be a key agenda item at the upcoming 56th GST Council meeting, likely to be scheduled later this month. Procedurally, a minimum 15-day notice is required to convene the meeting.

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Why It Matters

The 12 per cent GST category currently includes products that, while not strictly essential, are widely used by lower and middle-income segments. Scrapping this slab could not only reduce household expenses but also simplify India’s four-tier GST structure, which has long been under scrutiny for being complex and burdensome.

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