PMO approves in-principle GST revamp; proposal before Council likely by August: Report

According to the report, the proposal may be placed before the GST Council, the apex body for indirect tax decisions, at its upcoming meeting in August following the monsoon session of parliament.

The finance ministry will also reach out to states to build political consensus, while inter-ministerial consultations have already begun, the newspaper said.

The revamp would involve changes in tax slabs and procedural simplifications to provide relief to consumers and businesses, Economic Times reported.

Although a ministerial panel was previously mandated by the GST Council to look at rate rationalisation, it has made little headway so far, the report added.

One key proposal under consideration is scrapping the 12% slab and moving items into either the 5% or 18% categories, Economic Times said.

The current GST structure has five main slabs – nil, 5%, 12%, 18%, and 28% – along with two special rates for bullion at 0.25% and 3%.

The report said that industry has been urging the government for a recast to address pain points related to rates, slabs, and procedures, while lawmakers across parties have also flagged related concerns.

The timing is seen as favourable, with macroeconomic fundamentals strong and free trade agreements with advanced economies on the horizon, Economic Times reported, citing one of the people.

The compensation cess, levied on goods such as cigarettes and automobiles in the top 28% slab to compensate states for revenue losses from GST rollout, had been extended until March 31, 2026, to repay loans taken during the Covid period, the report added. A separate ministerial panel is also reviewing the use of surplus in the cess fund and its future roadmap.