New Delhi, Aug 18 (PTI) Finance Minister Nirmala Sitharaman will attend a crucial meeting of a state ministerial panel on August 20 to put forth the Centre's proposal for sweeping GST reforms that will slash tax rates and lead to reduction in prices of common use items.

The two-day meeting of the Group of Ministers (GoM) on GST rate rationalisation is scheduled on August 20-21 here, sources said.

The meet will deliberate on the Centre's proposal for GST reforms of reducing the number of tax slabs in Goods and Services Tax (GST) to two -- 5 and 18 per cent, and a 40 per cent special rate on a select few items.

Sources said apart from the rate rationalisation panel, the two-day meeting would be attended by members from GoMs on compensation cess and also health and life insurance.

"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.

The GST reforms proposed by the Centre come against the backdrop of the levy period of GST compensation cess nearing an end and also the impending rate rationalisation to deal with the industry problem of duty inversion in various sectors. Also, a rate tweak in both health and life insurance premiums were being worked out by a GoM to give relief to the common man.

The GST Council had earlier set up three separate GoMs on the three issues.

While Bihar Deputy Chief Minister Samrat Choudhary is the convenor of the GoM on rate rationalisation and health and life insurance, Minister of State for Finance Pankaj Chaudhary is the convenor of the GoM on compensation cess.

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 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.

Prime Minister Narendra Modi in his Independence Day speech had promised a Diwali gift for citizens by implementing GST reforms which will reduce tax rates and benefit the common man.

Soon after the announcement, the finance ministry unveiled its 'next generation' GST reform which is based on three pillars -- structural reforms, rate rationalisation and ease of compliance. PTI JD ANU

GST rate rationalisation proposes simplified slabs reducing tax burdens and reclassifying most goods ahead of GoM review The Centre proposes compressing the existing GST slab structure into a simplified low and standard slab while keeping the highest permissible GST rate only for a very limited set of demerit items, with the objective of lowering tax burdens for the middle class, MSMEs and the farm sector and correcting duty inversion; the Finance Minister will present this proposal to a Group of Ministers meeting, coordinated with panels on compensation cess and health and life insurance, before potential referral to the GST Council.