In a major policy development, the Indian government has initiated high-level talks to overhaul the Goods and Services Tax (GST) framework. According to a report by The Economic Times, the discussions aim to streamline the current slab structure, reduce business complexities, and prepare Indian industries for greater global competitiveness.

The GST overhaul talks come amid broader tax reform efforts, including the introduction of an income tax simplification bill earlier this year. Officials say the new momentum is driven by both domestic goals and international priorities, as India is in the final stages of concluding key trade agreements with the United Kingdom and the United States.

Launched in July 2017, GST unified multiple indirect taxes into a single system, creating a common national market. However, the existing structure with its multiple tax slabs has long been criticized by businesses for being too complicated and compliance-heavy. Sources involved in the ongoing discussions confirmed that the government is looking beyond cosmetic tweaks and is considering meaningful structural reforms. “GST is a key focus area. The current design needs to be evaluated thoroughly,” a senior government official told ET.

Another official said, “With tax collections stabilising and the compensation cess set to end, this is a timely opportunity to reassess the GST framework.” The compensation cess was initially introduced to compensate states for revenue losses post-GST implementation but is now approaching its expiry.

Industry experts and associations have long pushed for the consolidation of GST slabs into a simpler three-rate system. The current structure, which includes rates of 5%, 12%, 18%, and 28%, is seen as burdensome for businesses trying to maintain compliance and pricing clarity. The variation often leads to disputes and inconsistent tax enforcement.

Feedback gathered from trade bodies points to the need for:

• Fewer and well-defined tax slabs

• Streamlined compliance protocols

• A unified approach by central and state tax officials

• Greater clarity on luxury and essential goods differentiation

Officials confirmed that suggestions like dual rates and threshold pricing for luxury categories are under review. However, experts caution that some proposals risk complicating the system further, defeating the primary objective of simplification.

The timing of these discussions is significant, as India works toward finalising free trade agreements with the UK and the US. Officials believe that a simplified GST regime will improve the competitiveness of Indian products globally, making them more appealing in export markets. "The government is keen to align domestic policies with global trade objectives. Easing the tax burden on businesses is central to that goal," said another senior official.

The GST Council, the apex decision-making body on indirect taxes, had earlier formed a group of ministers in 2021 to evaluate slab revisions. However, progress has been slow due to divergent opinions among member states. With renewed urgency and mounting pressure from industry stakeholders, the next GST Council meeting is expected to take up the revamp discussions with greater seriousness. If consensus is reached, GST changes could be rolled out in phases starting later this year or early 2026. For now, businesses and taxpayers alike await clearer communication and firm decisions that could finally turn GST into the “good and simple tax” it was envisioned to be.