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Rationalisation of GST Rates

Rationalisation of GST Rates


  • GS 3 || Economy || Public Finance || Taxation

Why in news?

  • FM recently proposed to rationalize the tax regime into just 12 to 18% and even may further limit the tax into one single standard rate which may be within the range of 12% to 18 % rate.

Current Rates of GST

  • At present, GST has multiple rates – 0%, 0.25%, 3%, 5%, 12%, 18% and 28%. There are two standard rates, 12% and 18%. Along with services, barring those in the negative list, 1,216 goods fall under the periphery of these tax slabs.
    • 183 products at 0%,
    • 308 products at 5%,
    • 178 products at 12%
    • 517 products at 18%.
  • Only 28 items, of luxury items, AC, cement, auto components mainly, are in the slab of 28 per cent category. (There were around 226 goods in the 28% category, when the GST was implemented on July 1, 2017).


  • 28% slab to be phased out, except luxury and sin goods, which means many commodities which are in ’28 Slab’ will be picked out of the slab.
  • Nation may have only three types of taxes: 0%, 5% and standard rates (those rates which are between 12% and 18%)
  • To transfer cement into lower tax slab, right now it is in 28%. Other building materials have already been transferred from 28 to 18%.
  • In the 31st GST Council (Held on) postulated to cut rates on 23 goods and services. Around 97.7% of the total 1211 items will fall within slab of 18%. So, now only 2.3% of goods now fall under the 28% slab.


  • Solution to the over-taxation – Tax reformation somehow posed over-taxation onto some bodies of the nation. So, by dint of this rationalization, more encouragements towards the tax payment may happen.
  • Construction – Proposal to reduce cement taxation from 28% to 18% will bolster and boos the infrastructure scenario of the nation. Immense magnitude of unskilled labor also resides in this sector, so by lowering the taxes, workers may receive an escalated sum of their emoluments.
  • Affordable Housing – This proposal will provide more affordable housing to the people as the construction may increase within the nation.


  • Council – Lack of transparency in the selection of the panel of the council. Various crucial and important decisions the council takes on its front, but its comprise is bit vague among the citizens, which has led to put the question onto the council by several bodies.
  • Facilitation – Lack of software solution and system of verification has also led to the criticism of GST.
  • Others – Issues of exporters and MSME have also been turned up in decision making by the council.
  • IGST (Integrated Goods and Services Tax) –this process is also not being prevalent. When commodities are transferred from one state to other state, IGST turns up into the role. But, it is somehow underused.

Way Ahead

  • Centre –State Cooperation is in dire need of its implementations. The implementation may affect the short-term revenue of the nation, but after a while it may encourage more increase in tax payments and construction as well in the long period.
  • In the long run it will improve the business activities around the nation.
  • Concerns need to be addressed regarding the GST and its implications

Prelims bits

  • GST is an Indirect Tax.
  • Replaced many Indirect Taxes in India.
  • The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act was commenced from 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
  • In simple words, GST is an indirect tax levied on the supply of goods and services.

GST is one indirect tax for the whole nation.