In a major push to overhaul India’s Goods and Services Tax (GST) structure, Union Home Minister Amit Shah is set to take charge of high-level discussions with state governments and central ministries. The central objective is to streamline the current multi-slab tax system by removing the 12% GST slab, a move aimed at simplifying compliance and making GST more efficient.
Amit Shah to Drive GST Reforms
With several contentious issues stalling progress, Shah’s involvement marks a renewed political push to build consensus across party lines. His leadership role comes amid ongoing disagreements between BJP-ruled and Opposition-led states, especially on matters impacting tax revenues and federal cooperation.
The Home Minister has already consulted key officials in the Finance Ministry and is expected to play a larger role due to the politically sensitive nature of tax reforms. In the past, Shah has actively participated in major economic decisions such as disinvestment strategies and tackling food inflation.
Focus on Eliminating the 12% GST Slab
One of the most significant proposals on the table is to scrap the 12% GST rate. Goods currently taxed at this rate—such as packaged food, medical supplies, furniture, and household items—may be moved either to the 5% slab or the 18% slab. While this could simplify the overall tax structure, it may also lead to a revenue shortfall of approximately ₹70,000 to ₹80,000 crore for both Centre and states combined.
Due to the potential fiscal impact, several states have expressed concerns, making it crucial to reach broad-based political agreement before presenting the proposal in the GST Council.
Why the GST Reform is Needed
India’s GST system, launched in July 2017, currently includes five key slabs—0%, 5%, 12%, 18%, and 28%—along with additional cesses on luxury and sin goods. Multiple attempts have been made over the past four years to reduce slab complexity and improve tax administration.
As per 2023–24 GST collection data:
- 18% slab contributes nearly 70–75% of total revenue
- 12% slab yields only 5–6%
- 5% slab contributes about 6–8%
- 28% slab brings in 13–15%
Removing the 12% slab would align more goods with the slabs that generate the majority of revenue, thereby creating a more rationalised tax structure.
Pending Demands from Opposition-Ruled States
In addition to slab restructuring, several Opposition-ruled states have been urging the Council to lower GST on life and health insurance premiums from 18% to 5%. However, this proposal was deferred during the 55th GST Council Meeting held in December 2024.
What Lies Ahead
The final decision on GST rate changes will depend on further consultations and impact assessments. With Amit Shah spearheading the discussions, the central government hopes to break the political deadlock and move toward a more streamlined and taxpayer-friendly GST regime.