Major GST revamp: Centre proposes reducing slabs from 4 to 2, 5% and 18% likely to be retained
As part of the plan, nearly 90% of items currently taxed at 28% would shift to the 18% bracket, while about 99% of goods in the 12% slab would move to 5%.
PTC News Desk: The Centre is considering reducing Goods and Services Tax (GST) to just two slabs — 5% and 18% — according to sources.
As part of the plan, nearly 90% of items currently taxed at 28% would shift to the 18% bracket, while about 99% of goods in the 12% slab would move to 5%. A separate 40% rate would apply only to luxury and sin goods such as tobacco, gutkha, and cigarettes, limited to about 5–7 items. However, consumer durables like refrigerators, air conditioners, and washing machines will not fall under this higher tax band.
Petroleum products will remain outside the GST framework under the revised structure. Labour-intensive, export-driven sectors such as diamonds and precious stones will continue under existing rates.
Officials said the overall tax incidence will stay close to the current 88%. The government expects the simplified GST structure to stimulate consumption, offsetting potential revenue losses from lower rates.
The proposal is backed by Finance Ministry data showing that 67% of GST revenue is generated from items in the 18% slab, while the 28%, 12%, and 5% brackets contribute 11%, 5%, and 7% respectively.
The revamp plan was unveiled shortly after Prime Minister Narendra Modi, in his Independence Day address, promised GST reforms as part of a “double Diwali” gift. The reforms aim to rationalise tax rates in a way that benefits all sections of society, particularly women, students, farmers, the middle class, and the common man.
This announcement came alongside other key initiatives, including a national deep-sea exploration mission to boost energy self-reliance and the development of an indigenous “Sudarshan Chakra” defence system by 2035.
The GST Council, comprising Union and state finance ministers, is expected to take up the proposal for approval in September or October.
According to GST expert and economist Ved Jain, the changes would lower taxes on several essential goods, making them cheaper, and directly benefitting households, farmers, and the middle class.