12% & 28% GST rate Scrapped, leaving only 2 Slab of 5% & 18%

The existing 12% & 28% GST rates were Scrapped, which resulted in leaving only 2 FST slab of 5% & 18% rates.

• The Group of Ministers on GST rate rationalisation has accepted the Centre’s proposal to reduce the current four-slab structure to two, Bihar Deputy Chief Minister Samrat Choudhary said on Thursday.
• The Group of Ministers, chaired by Choudhary, endorsed the move to scrap the existing 12% and 28% rates, leaving just two standard slabs of 5% and 18%. “The GoM has decided to accept the 2 proposals of the Centre,” Choudhary said after the meeting, confirming that the panel had given its recommendations.
• Under the plan, 99% of items currently taxed at 12% will be shifted to the 5% slab, while 90% of those under the 28% bracket will move to 18%. A higher 40% levy is likely to be retained on 5–7 “sin goods”, including ultra-luxury items such as high-end cars.
• The 6-member GoM also includes Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, and Kerala Finance Minister K. N. Balagopal.
• Khanna said all states had welcomed the proposal, calling it “in the interest of the common man.” He added that revenue loss from the new structure would be calculated, as some states demanded compensation to offset shortfalls.
• West Bengal’s Bhattacharya, while supporting pro-people rationalisation, cautioned that the Centre’s proposal did not account for revenue loss. “Ultimately, if a state suffers any loss, it boils down to the sufferance of the common man. The GST Council will discuss the rate proposal item by item,” she noted.
• The GoM has accepted the proposal, noting that rate rationalisation will simplify the indirect tax system while providing relief to households, farmers, the middle class, and MSMEs.”

FM Nirmala Sitharaman say GST reform would create transparent and growth-oriented

• The center has argued that rate rationalisation would simplify the indirect tax system while ensuring relief for households, farmers, the middle class, & MSMEs. FM Nirmala Sitharaman had told the Group of Ministers earlier this week that GST reform would create a “transparent and growth-oriented” GST regime.
• Telangana Deputy CM Mallu Bhatti Vikramarka also extended support to the reform but stressed the need for a robust compensation mechanism. The state suggested either retaining the current compensation cess system or raising GST on sin and luxury goods to ensure states are protected against revenue erosion.
• The rationalisation debate comes a day after another Group of Ministers meeting, where most states backed a proposal to exempt health and life insurance premiums for individuals from GST. While the move could result in an estimated annual revenue loss of INR 9,700 cr, states emphasised that mechanisms must be put in place to ensure the benefit is passed on to policyholders.

Note on Change in Rate of GST (Section 14)

• When the rate of GST changes, the Time of Supply (TOS) determines whether the old rate or new rate applies. The TOS is identified by considering three key events: Date of supply of goods/services , Date of invoice issued & Date of receipt of payment

Golden Rule on Change in Rate of GST

• If two out of three events occur before the rate change : Old rate applies.

• If two out of three events occur after the rate change : New rate applies.

Important Point on Payment

• For “receipt of payment,” if the amount is credited to the bank account more than 4 working days after the rate change, then the date of bank credit (not the books entry date) will be considered.
• Always check the sequence of Supply – Invoice – Payment. Whichever side (before or after rate change) has two events, that rate will govern the transaction.