The GST Council is poised to take a decision on reducing the number of tax slabs and lowering rates, as the review process is nearing completion, Finance Minister Nirmala Sitharaman announced on Tuesday.
Currently, the Goods and Services Tax (GST) operates under a four-tier structure with rates of 5%, 12%, 18%, and 28%. While essential items and packaged food products fall under the lowest 5% bracket, luxury and demerit goods attract the highest levy of 28%.
The Council, chaired by Sitharaman and comprising state finance ministers, had earlier constituted a Group of Ministers (GoM) to evaluate potential changes in GST rates and rationalize tax slabs.
“Efforts to simplify and rationalize GST rates have been underway for nearly three years. The review process has now reached its final stages,” Sitharaman stated at the India Today-Business Today Post Budget Round Table.
Highlighting the significance of a comprehensive review, she emphasized that GST rates impact everyday consumption and must be evaluated carefully. She also reiterated the original objective of having fewer and lower tax rates.
“For me, it is crucial that we do not miss this opportunity. We must work towards fewer rates, and where possible, lower them. I hope the GST Council will reach a decision soon,” she added.
Strong Economic Fundamentals and Commitment to Taxpayers
Days after presenting the Union Budget 2025-26, which introduced significant income tax relief for the middle class, Sitharaman reaffirmed the strength of India's economic fundamentals, dismissing concerns of any structural slowdown.
She asserted that the tax relief measures reflect Prime Minister Narendra Modi’s commitment to taxpayers, rejecting speculation that the move was politically motivated ahead of the Delhi Assembly elections. Additionally, she clarified that there is no proposal to discontinue the old tax regime.
Capital Expenditure Sees Continued Growth
Addressing concerns on capital expenditure (capex), Sitharaman emphasized that the allocation has increased, not declined. The Budget for FY26 has earmarked ₹11.21 lakh crore for capex, representing 4.3% of GDP—up from ₹10.18 lakh crore in the Revised Estimates for FY25.
Over the past few years, the government has consistently expanded its capital expenditure outlay:
- FY24: ₹10 lakh crore
- FY23: ₹7.5 lakh crore
- FY22: ₹5.54 lakh crore
- FY21: ₹4.39 lakh crore
Meanwhile, the fiscal deficit for FY26 has been projected at 4.4% of GDP, with the target for FY25 revised downward by 10 basis points to 4.8% of GDP.
As India moves toward a more streamlined tax system, the impending GST rate revision is expected to bring greater efficiency and stability to the taxation framework, aligning with the government's broader economic reform agenda.
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