Daijiworld Media Network – New Delhi

New Delhi, Sep 2: Finance minister Nirmala Sitharaman is likely to present the centre’s proposal for rationalising goods and services tax (GST) rates before a group of ministers (GoM) at a two-day meeting starting August 20 in New Delhi.

The GoM, headed by Bihar deputy chief minister Samrat Choudhary, is scheduled to meet in person at Vigyan Bhawan on August 20 and 21, with proceedings beginning at noon. A six-member state panel is expected to deliberate on the Union government’s plan to move to a simplified two-slab GST structure, while the GST Council will meet on September 18-19 to take a final call on the proposal.

The proposed revamp comes at a time when Morgan Stanley has highlighted tax reforms as crucial for supporting India’s domestic consumption story. According to the global investment house, a likely GST overhaul, combined with income-tax cuts, policy easing, rising employment, and improving real wages, could boost domestic demand, even if a short-term slowdown occurs as consumers await clarity on new rates.

Lower indirect taxes are expected to improve affordability for low-income households, since indirect levies are regressive. The analysis suggested that the GST overhaul could act as a stimulus of 0.5-0.6% of GDP annually, potentially lifting GDP growth by 50-70 basis points, while reducing CPI inflation by up to 40 basis points. However, both the Centre and states may face short-term revenue pressures.

The new GST framework aligns with Prime Minister Narendra Modi’s Independence Day announcement of “next-gen GST reforms before Diwali” and is based on three pillars: structural reforms, rate rationalisation, and ease of living. The proposed structure envisages two main rates — 5% for essential items and 18% as the standard rate.