The Centre is considering a major overhaul of the Goods and Services Tax (GST) structure, aiming to simplify the system by reducing the current four tax slabs to just two—5% and 18%. According to sources, this move is designed to make compliance easier, correct inverted duty structures, and stimulate consumption. While most goods and services would fall under these two main rates, a special 40% slab would remain for a small set of luxury and sin goods, such as tobacco, affecting only about five to seven items.
As part of the proposed changes, nearly 99% of products currently taxed at 12% are expected to move to the 5% slab. Similarly, about 90% of goods in the 28% category, including white goods and certain high-end products, would be shifted to the 18% bracket. This reclassification is likely to result in significant price reductions for a wide range of everyday consumer items, benefiting households and potentially boosting demand, especially during the upcoming festive season.
The government is targeting an implementation timeline around Diwali 2025. A Group of Ministers has already received the proposal, and the GST Council is expected to take it up for discussion in September. Prime Minister Narendra Modi, in his Independence Day address, hinted at these reforms as part of a broader effort to strengthen the economy and promote ease of doing business.
While the move could bring relief to consumers and support domestic industries, it may also have revenue implications for the government. Analysts suggest that shifting goods from higher slabs to lower ones could reduce tax collections, though it might also serve as a fiscal stimulus equivalent to 0.6–0.7% of GDP. The final decision will depend on the Council’s deliberations, but if implemented, the two-slab GST system would mark one of the most significant tax reforms since the GST’s introduction in 2017.
