• Source:JND
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The Central government has proposed to scrap two GST tax slabs of 12 per cent and 28 per cent, leaving only two slabs of 5 and 18 per cent, news agency PTI reported based on sources. 

Moreover, a special 40 per cent rate will be levied on luxurious and sin products. It marks the biggest GST reform since it was introduced in July 2017.

What's current tax regime?

At present, the government levies GST on items in following classification:

-Nil or zero per cent GST on essential food items

-5 per cent on daily use items

-12 per cent on standard goods

-18 per cent electronics and services

-28 per cent on luxury and sin goods

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What are the changes proposed?

According to the report, 99 per cent of the commodities in the current 12 per cent bracket will be moved to 5 per cent, thereby reducing the cost of these products in consumers' interest.

Similarly, about 90 per cent of the items in the 28 per cent bracket will be moved to the 18 per cent slab in the revised GST regime. The government is expecting it will give consumption a big boost, which will offset revenue loss due to rate rationalisation.

The government has proposed that the items of common use and daily-use products be taxed at 5 per cent in the revamped GST regime.

Hefty 40 per cent tax on few products

The luxurious and sin items like tobacco, its products, and luxury cars, among others, which are currently taxed at 28 per cent are to be taxed at 40 per cent. This means the luxurious items and tobacco products are set to see a rise in their cost.

The 28% slab was designed to penalise indulgence and environmental impact, while also serving as a revenue booster for the government.

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When will the changes come into effect?

The new regime will come into effect after the GST Council approves the government's proposal. The GST Council is a Constitutional body which is the top decision making institution for the GST. It has Union Finance Minister as its Chairman and finance ministers of all states as its members.