GOODS AND SERVICES TAX (GST) (Syllabus: GS Paper 3 – Economy)

Context: A panel of state ministers tasked with suggesting changes to the Goods and Services Tax (GST) regime has signalled that the current four-slab tax structure should remain in place —“for now”.

Goods and Services Tax (GST)

• About: It is a comprehensive, multi-stage, destination-based, that is levied on every value addition, focusing on the consumption of goods and Services.

oDestination tax refers to a tax collected by the authority with jurisdiction over the place of consumption, also known as the place of supply.

• Introduced by: The Constitution (101st Amendment) Act, 2016, introduced by 122nd Amendment Bill.
• Came into effect: From 1st July 2017.
• Origin: GST was first implemented as a tax regime in 1954 in France and later adopted by several countries, including Australia, Cnanada, UK, Spain etc.
• In India: It came into consideration after a committee headed by Vijay L. Kelkar concluded that GST could help improve tax structure in India.
• State Ministers Panel: First formed in 2021, Reconstituted in November 2023
• GST Tax Structure: Central GST (CGST), State GST (SGST), Integrated GST (IGST) and Union Territory GST (UTGST).
• Current GST regime: Goods and Services are taxed across five broad slabs — 0%, 5%, 12%, 18%, and 28%. A cess is levied on top of the 28% rate for luxury and sin goods.
• Suggestions: One proposal includes tax slabs of 8%, 16%, and 24%. 

oAnother suggests 9%, 18%, and 27%. 

oA third alternative sets rates at 7%, 14%, and 21%. 

oEach model aims to shield essential goods from significant tax increases and may include a provision of tax abatements.