The Goods and Services Tax (GST) Council has kicked off its two-day meeting, chaired by Finance Minister Nirmala Sitharaman, with significant reforms expected. The council is likely to announce changes affecting daily essentials, consumer goods, luxury items, and the overall GST compliance framework. The meeting follows Prime Minister Narendra Modi’s Independence Day announcement promising GST relief as a “Diwali gift” for middle-class families, farmers, small businesses, and the common man.
One of the most significant proposals under discussion is to reduce GST slabs from four to two. Currently, goods and services are taxed at 5%, 12%, 18%, and 28%. The council is considering retaining only 5% and 18%, simplifying the tax framework.
Most items in the 12% slab, such as ghee, nuts, packaged water, soft drinks, namkeen, medicines, and medical equipment, may move to 5%.
Goods under the 28% slab, including consumer durables like TVs, refrigerators, and washing machines, could shift to 18%.
This move aims to lower prices for everyday goods and make the GST system easier to understand for both consumers and businesses.
While daily essentials may become more affordable, luxury and sin items are expected to face higher levies:
Premium cars and SUVs, currently taxed at 28% GST plus cess, may see rates rise to 40%.
Products like tobacco, pan masala, and expensive apparel priced above ₹2,500 could attract steeper taxes.
Business-class and premium air travel may witness GST increase from 12% to 18%.
The intention behind this change is to balance the relief provided to common goods while generating additional revenue from luxury and high-end consumption.
With the proposed slab rationalization, a significant portion of daily-use items could see price reductions:
Goods moving from 12% to 5% include ghee, packaged water, soft beverages, nuts, namkeen, and medical devices.
Household essentials such as bicycles, umbrellas, pencils, and hairpins may also get cheaper.
Consumer durables like televisions, washing machines, and refrigerators, currently at 28%, could be taxed at 18%, reducing the overall cost to buyers.
This initiative is expected to benefit the majority of Indian consumers, making essential products more affordable and easing the financial burden on middle-class families.
If approved, the reforms would not only impact pricing for consumers but also have major effects on businesses:
Faster GST refunds would reduce cash flow issues for companies.
Simplified compliance with only two tax slabs would make filing returns easier and reduce errors.
Businesses dealing with luxury goods may need to adjust pricing strategies to accommodate higher taxes.
Overall, the proposed reforms could streamline India’s indirect tax system, providing clarity and easing operational challenges for companies across sectors.
The GST slab rationalization is significant because it directly affects the cost of living and business operations:
Consumers: Daily essentials may become cheaper, easing household expenses.
Businesses: Streamlined GST could reduce administrative burdens and improve cash flow.
Government: Higher levies on luxury and sin items will maintain revenue neutrality while funding public services.
The council’s decisions are anticipated to create a more balanced, simplified, and transparent GST regime, benefiting both taxpayers and the government.