Contents 1. Two-slab GST system
2. Equator Prize
3. Ejiao
Two-slab GST system
Why in news? The proposed two-slab GST system is a major reform under consideration by the Indian government to simplify and rationalize the country's Goods and Services Tax (GST) structure.
Here are the key features and implications of this system:
Structure: The existing four-tier GST structure (5%, 12%, 18%, 28%) will be replaced by just two primary tax slabs:
5% slab: Intended mainly for essential and daily-use goods.
18% slab: Will cover most other goods and services, essentially absorbing the current 12% and 28% categories. About 99% of items currently taxed at 12% are expected to move to 5%, and about 90% of those in the 28% slab may shift to 18%.
Special Rates: Select items, particularly luxury and sin goods (e.g., tobacco, luxury automobiles), may attract a much higher special rate, potentially around 40%.
Rationale and Goals:
To simplify compliance for businesses and reduce classification disputes.
To correct inverted duty structures, minimizing input tax credit accumulation.
To make the system more stable and predictable, supporting industrial and economic growth.
To reduce the GST burden on common and aspirational goods, aiming to increase affordability and stimulate consumption.
Long-term goal to move towards a single GST slab by 2047, aligning with global best practices.
Timing: The reforms are expected to be discussed by the GST Council in September 2025, with a rollout targeted around Diwali 2025, if consensus is reached.
Impact: The simplified two-tier system is expected to:
Lower tax rates for many common use items, boosting affordability and consumption.
Help small and medium-sized businesses by reducing compliance burdens.
Enhance predictability and ease of doing business for all sectors.
The government emphasizes that only a small set of goods (such as those currently under luxury or "sin" item categories) will see special, higher rates, while the vast majority of goods and services will fall under the two main slabs.
This proposed reform represents one of the most significant tax structure overhauls since GST was first implemented in 2017.
Key mechanisms to simplify the current tax classification: 1. Reducing the Number of Tax Rates
The existing four-tier structure (5%, 12%, 18%, and 28%) creates ambiguity and frequent disputes over the correct classification of goods and services. The two-slab model—primarily 5% and 18%—means fewer brackets, making it easier to classify products accurately without the risk of interpretive error or manipulation.
Special rates will only apply to a select few items, further minimizing edge cases where classification disputes usually arise.
2. Minimizing Classification Disputes
With fewer rates, the scope for arguments over which slab a product or service belongs to is dramatically reduced. This helps prevent litigation between taxpayers and authorities on rate applicability, a common problem under the current multi-rate regime.
The reform will also resolve many inverted duty structure issues, where input costs are taxed at higher rates than finished goods, again by consolidating slabs and providing clearer rate guidance.
3. Providing Tax Certainty and Consistency
The simplified system provides greater rate stability and predictability for businesses and consumers, supporting long-term planning, price setting, and compliance.
Auditors, businesses, and revenue authorities will spend far less time on classification checks and legal disputes, lowering compliance costs and freeing up resources for business growth.
4. Global Alignment
The two-rate GST structure brings India closer to international best practices, where most advanced economies rely on a merit rate (for essentials) and a standard rate (for general goods and services).
5. Ensuring Equity
By shifting essential and aspirational goods to lower rates and retaining a higher slab only for luxury or “sin” goods, the reform addresses both tax equity and clarity in the system.
The two-slab GST model is expected to greatly streamline classification, reduce disputes and legal battles, stabilize rates, simplify compliance, and make the entire indirect tax regime more predictable, efficient, and business-friendly in India.
Significant challenges: 1. Revenue Implications
Risk of Reduced Government Revenue: Consolidating multiple slabs into just two main rates (5% and 18%) may lead to a substantial reduction in tax revenues, especially if many goods currently taxed at higher rates drop to the lower slab. Both Central and State governments rely heavily on GST revenues, and a decline could affect social and economic development programs.
Balancing Rates: Most GST revenue is generated from the current 18% slab; shifting items from higher slabs could lower total collections, which is a concern for fiscal management.
2. Inflation and Price Impact
Effect on Prices: Re-aligning GST rates can lead to price changes for goods and services. Some goods moving from higher to lower rates may drop in price, but others might increase, depending on placement in the new slabs. This can cause short-term inflationary pressures and adjustment pains for consumers and businesses.
Transition Volatility: Initial months after switching to the new system could see volatility in pricing, supply chains, and compliance as businesses adapt.
3. Federal and Political Challenges
State-Centre Disagreements: The GST Council includes both central and state government representatives, each with different priorities. Achieving consensus on rate changes—and their impact on state revenues—could be time-consuming and contentious.
Compensation Cess: Some states rely on the compensation cess to offset GST revenue losses; removing or reducing this could provoke federal disputes.
4. Classification Disputes
Special Rates for Certain Goods: Even in a two-slab system, disputes may arise over which slab or special rate an item belongs to, especially for products with mixed use or new goods. Past litigation over classification (e.g., food items vs. luxury goods) may continue.
5. Compliance and System Adjustments
Transition Burden for Businesses: SMEs and enterprises will need to update accounting systems, IT infrastructure, and compliance processes to match new rates. This transitional adjustment could be costly and complex.
Training and Awareness: Widespread re-training will be needed across sectors to ensure smooth adaptation, particularly in smaller businesses.
6. Sectoral Impact (e.g., Real Estate)
While sectors like real estate might benefit from reduced input costs, whether these savings are passed to consumers or absorbed by developers depends on market practices and pricing decisions.
7. Risk of Informalisation
If rates are set too high for certain categories, businesses may try to avoid taxes by moving transactions into the informal sector, undermining the goals of GST.
While a simplified GST regime offers major benefits—such as reduced compliance, less litigation, and greater clarity—it faces critical implementation risks around revenue stability, consensus building, inflation control, legal disputes, and transition costs across India’s diverse economic landscape.
Equator Prize
Why in news? Bibi Fatima women’s Self-Help Group (SHG) from Teertha village, Karnataka among global winners of UNDP Equator Prize 2025
Theme 2025: Nature for Climate Action with a special focus on youth and women-led initiatives. Prize: Each winner receives $10,000 and global recognition, with invitations to participate in leading UN events such as the UN General Assembly and COP30 in Brazil.
Overview The Equator Prize is an international award managed by the Equator Initiative within the United Nations Development Programme (UNDP). It is presented annually to recognize outstanding nature-based solutions led by Indigenous Peoples and local communities that promote sustainable development, ecological resilience, and biodiversity conservation.
Purpose and Impact
Goal: To honor community-led efforts that reduce poverty through the sustainable use of biodiversity.
Focus Areas: Protecting and restoring ecosystems, advancing climate change mitigation/adaptation, and promoting inclusive green economies through nature-based solutions.
Special emphasis: Every cycle focuses on pressing themes; in 2025, the theme was Women and Youth Leadership for Nature-Based Climate Action.
Recent Highlights
Ten winners were announced in 2025, chosen from over 700 nominations spanning 103 countries. Winners come from Argentina, Brazil, Ecuador, India, Indonesia, Kenya, Papua New Guinea, Peru, and Tanzania.
Indian context:
The Bibi Fatima Women’s Self-Help Group (SHG) from Teertha village, Karnataka
Formed in 2018, now supporting over 5,000 farmers in 30 villages
Promotes millet-based mixed cropping, eco-friendly natural farming, manages seed banks, processes millet using solar power, and empowers women through rural agribusiness partnerships
Other Initiatives: Range from rainforest conservation and marine ecosystem restoration to Indigenous craft cooperatives and agrobiodiversity zones. Women and youth leadership are central to their success.
Significance The Equator Prize is often described as a “Nobel Prize for Biodiversity Conservation” and has honored more than 296 community organizations since its start in 2002. The award amplifies local voices, supports nature-based solutions, and contributes towards achieving climate resilience and the Sustainable Development Goals.
Ejiao
Why in news? Nearly six million donkeys are killed annually worldwide, primarily to meet Chinese demand for Ejiao
About
Ejiao (pronounced eh-gee-yow) is a traditional Chinese medicine made from gelatin derived by boiling donkey hides.
It has been used for over 2,000 years in China, primarily for nourishing blood and tonifying the body, especially in women.
The main components of ejiao are collagen and amino acids. It is believed to treat conditions like anemia, dizziness, insomnia, dry cough, and reproductive problems.
Ejiao is also used in some food products and cosmetics, thought to have blood tonic, anti-aging, and libido-boosting properties.
Global demand for Ejiao and consequences on donkey populations worldwide:
Scale of Demand: The Ejiao industry requires around 5.9 million donkey skins annually as of 2025, and this figure is projected to reach at least 6.8 million by 2027 to meet global consumer demand, primarily centered in China.
Market Size: Ejiao production has become a $6.8-billion industry, fueling a massive global trade in donkey hides, often involving illegal and unregulated networks.
Source Shift: As China’s domestic donkey population plunged from 11 million in 1992 to just 1.5 million by 2023, the country has increasingly turned to Africa, South America, and Asia as sources for donkey skins.
Impact on Donkey Populations:
In Africa, donkey numbers may be halved over the next 15 years if the current pace of slaughter continues. Africa’s donkey population could decline from about 27 million down to just 14 million by 2040 unless bans on the trade are strictly enforced.
Villagers in Africa, South America, and Asia have reported widespread theft and poaching of donkeys for the Ejiao trade. Many families suffer lost livelihoods, as donkeys are essential for agriculture and transport.
The loss of donkeys has a disproportionate impact on vulnerable communities, particularly women and children who rely on them for daily subsistence tasks.
Economic and Welfare Fallout: The price of donkeys has surged—sometimes fivefold—putting them out of reach for poor families. Criminal networks exploit communities, and the trade’s illegality contributes to inhumane slaughter and public health risks, including the spread of infectious diseases.
Policy Response: In 2024, the African Union issued a 15-year moratorium on donkey slaughter, aiming to protect remaining populations, though enforcement challenges remain.
In summary, the booming demand for Ejiao is driving a global crisis for donkeys, decimating population numbers, and harming the lives of people who depend on them worldwide.
