The Group of Ministers (GoM) on GST rate rationalisation has recommended the elimination of the 12 percent and 28 percent tax slabs, paving the way for a simpler and more structured Goods and Services Tax system in India. The decision is being hailed as a key reform aimed at reducing complexity and making compliance easier for businesses across sectors.
Since the introduction of GST in 2017, one of the major criticisms has been its multiple tax brackets, which often led to confusion and litigation. Currently, GST has five major slabs: 0 percent, 5 percent, 12 percent, 18 percent, and 28 percent. The GoM’s decision to phase out the 12 percent and 28 percent categories reflects the government’s effort to simplify the framework and move toward a three-slab system.
Under the proposed rationalisation, most goods and services that previously fell under the 12 percent bracket are likely to be shifted to the 5 percent or 18 percent categories, depending on their essentiality and revenue impact. Similarly, items under the 28 percent slab are expected to be reallocated primarily to the 18 percent bracket, though a few luxury and sin goods may continue to attract higher rates through special cesses.
Experts believe that this move will bring multiple benefits. First, it will ease compliance for small and medium enterprises, which often struggle with classification disputes. Second, it will reduce the scope of tax evasion and misreporting, as fewer slabs mean clearer distinctions between categories. Third, consumers may benefit from more predictable pricing, especially if rate adjustments are passed on in a fair manner.
The GoM’s proposal also aims to strike a balance between revenue neutrality and economic growth. While rationalisation could initially cause some fluctuations in tax collections, officials are confident that a simplified structure will encourage higher compliance and broaden the tax base in the long run.
Industry bodies have welcomed the development, noting that rate rationalisation has been a long-standing demand. Retail, manufacturing, and service sectors expect smoother operations under a leaner tax regime. The reduction in disputes related to classification and input tax credits is also expected to save businesses significant costs in terms of time and resources.
On the other hand, some concerns remain about the transition phase. Businesses will need to adjust their billing, accounting, and supply chain systems to align with the revised structure. Moreover, certain sectors currently taxed at lower rates under the 12 percent category may see an increase if they are shifted to the 18 percent bracket, potentially affecting consumer prices.
Despite these challenges, the consensus is that the move marks a positive step toward achieving the long-term vision of “One Nation, One Tax, One Market.” The GST Council is expected to deliberate further on the GoM’s recommendations before formal implementation. If approved, the changes could be rolled out in a phased manner, giving industries sufficient time to adapt.
The rationalisation is part of a broader government push to make India’s taxation system more transparent, business-friendly, and aligned with global standards. With this reform, GST is expected to become simpler, fairer, and more effective in driving India’s economic growth.
