New Delhi: The Union Finance Ministry on Friday said it has proposed a two-slab GST rate structure to the Group of Ministers (GoM), along with special rates for select few items, as the government looks to unveil ‘next generation’ GST reforms in the current financial year, which will lower tax burden on daily use items. The Centre has proposed to a panel of state finance ministers that the Goods and Services tax (GST) regime should have just two slabs where goods and services can be classified as ‘standard’ and ‘merit’.

Also, special rates can be levied on select items which will be specified. Currently, GST is a four-tier tax structure of 5, 12, 18 and 28 per cent, where essential items are either exempted or taxed at the lower tax bracket, while demerit and luxury items at the highest slab. Besides, a compensation cess is levied at varied rates on demerit and luxury items like pan masala and cars.

With the compensation cess regime coming to an end on March 31, 2026, the GST Council will also have to work out a mechanism regarding the rates of tax that can be levied on goods which currently attract compensation cess. The GST Council, chaired by Finance minister Nirmala Sitharaman and comprising state ministers, is expected to meet in September to discuss the GoM proposal on rate rationalisation.

“The GST Council in its next meeting will deliberate on the recommendations of GoM, and every effort will be made to facilitate early implementation so that the intended benefits are substantially realised within the current financial year,” the Finance Ministry said, while unveiling its proposal which has been submitted to the rate rationalisation GoM.