Why in the News?

In its 56th meeting, the Goods and Services Tax (GST) Council approved a two-rate structure with special category rates, effective 22 September 2025.

What is GST?

Overview: A comprehensive, multi-stage, destination-based indirect tax on goods and services.
Launch: Introduced 1 July 2017 via 101st Constitutional Amendment Act, 2016.
Objective: “One Nation, One Tax” to reduce cascading taxes, simplify compliance, and expand base.
Earlier Structure: Five slabs initially (0, 5, 12, 18, 28%) plus cess on luxury/sin goods.
Exemptions: Essential items like food grains, medicines, education; petroleum, alcohol, electricity remain outside GST.

Constitutional Basis: Created under Article 279A (inserted by the Constitution (One Hundred and First Amendment) Act, 2016).
Composition: Chaired by Union Finance Minister, with MoS Finance and all state finance/taxation ministers.
Voting: Centre – one-third weight, States – two-thirds; requires 75% weighted votes for decisions.
Meetings: Held quarterly; over 55 meetings so far.
Role: Decides on rates, exemptions, compliance, and dispute resolution, making it a key fiscal federal institution.

GST Council approves two-rate tax slab effective September 22

Simplification: At the 56th GST Council meeting (Sept 2025), slabs reduced to two rates plus a special rate.
Main Slabs: 5% and 18% apply on most goods and services.
Special 40% Rate: Levied on sin goods (tobacco, pan masala, aerated drinks) and super-luxury items (large cars, yachts, private aircraft).
Rate Reductions:
- Daily-use items (soap, shampoo, toothpaste, bicycles, kitchenware) now at 5%.
- Cement down from 28% to 18%.
- Small cars, motorcycles <350cc, ACs, TVs, dishwashers shifted to 18%.
- Food staples (milk, paneer, rotis, chapatis, parathas) at 0%.
- Life-saving drugs, spectacles corrected to 0–5%.
Inverted Duty Fix: Man-made fibre, yarn, fertilizers, acids, ammonia cut to 5%.
Revenue Impact: Estimated loss of ₹48,000 crore, expected to be offset by higher compliance and buoyancy.

[UPSC 2017] What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.

2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.

3. It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:

Options: (a) 1 only * (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3