Nirmala Sitharaman to address crucial meeting on August 20 to put forth Centre's GST rate cut proposal

New Delhi: Finance Minister Nirmala Sitharaman will on Wednesday address a crucial meeting of a group of ministers of states as she makes a case for the sweeping GST reforms that will slash tax rates and lead to reduction in prices of common use items.

The Centre has proposed a 2-tier GST structure of 5 and 18 per cent, besides a 40 per cent special rate on a select few items to the GoM on GST rate rationalisation.

The proposal, which entails removing the current 12 and 28 per cent tax slabs, will be discussed at the 2-day meeting of the state ministerial panel on August 20 and 21 here in the national capital, sources said.

"The idea is to put forth the Centre's view point behind the GST reform proposal. Although the Centre is not a member of the GoM, Union Finance Minister's presence and her address will give the GoM a better understanding of the idea and thought process behind the Centre's proposal," a source told PTI.

Bihar Deputy Chief Minister Samrat Choudhary is the convenor of the six-member GoM. The other members are Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, Kerala Finance Minister K N Balagopal.

The Centre has proposed two-slab structure of 5 and 18 per cent classifying items under the category of 'merit' and 'standard' and the broad principle followed in the classification is to reduce tax burden for middle class, MSMEs, and the farm sector.

The proposed 40 per cent slab, the highest permissible tax rate under the GST law, will be only for about 5-7 items, including demerit goods like pan masala, tobacco and online gaming.

Goods and Services Tax (GST) is currently levied at 5, 12, 18 and 28 per cent. While food and essential items are either at nil or 5 per cent, luxury and demerit goods are in 28 per cent slab, with a cess on top of it.

If the Centre's proposal is accepted by the GoM, it would be placed before the GST Council, chaired by Sitharaman and comprising finance ministers from all states and UTs, in its meeting likely next month.

The Centre's proposal entails moving 99 per cent of the goods in the current 12 per cent slab to 5 per cent, and 90 per cent of the goods and services in 28 per cent slab to the 18 per cent bracket.