The Goods and Services Tax (GST) structure is set for its biggest change since its launch. The Group of Ministers (GoM), headed by Bihar Deputy Chief Minister Samrat Choudhary, has approved the central government’s proposal to simplify GST rates. Under the new system, the four existing slabs of 5%, 12%, 18%, and 28% will be merged into just two—5% and 18%. However, luxury and sin goods will continue to attract 40% tax.
Finance Minister Nirmala Sitharaman said the new structure will benefit farmers, middle-class families, and small businesses. According to her, the system will be more transparent, growth-friendly, and easier to comply with. The government believes that reducing the number of slabs will curb tax evasion. This will make the tax system simpler for both consumers and traders.
What Will Become Cheaper?
Most everyday goods will fall into lower tax categories.
Items shifting from 12% to 5% include dry fruits, branded snacks, toothpaste, soap, hair oil, and common antibiotics. Painkillers, processed food, frozen vegetables, and condensed milk are also included. Household items like sewing machines, pressure cookers, and geysers will also get cheaper. Clothes above ₹1,000, footwear between ₹500 and ₹1,000, most vaccines, HIV and TB diagnostic kits, cycles, and utensils will move to the 5% slab.
Items shifting from 28% to 18% include cement, chocolates, beauty products, ready-mix concrete, televisions, and refrigerators. Washing machines, air conditioners, dishwashers, and printers are included as well. Rubber tyres, aluminium foil, tempered glass, razors, and manicure kits will also come down to the 18% bracket. Even private aircraft and some high-end goods will see reduced rates.
Luxury and harmful products will remain under a high tax rate of 40%. These include alcohol, tobacco, drugs, gambling, sugary drinks, fast food, coffee, and pornography. The government argues that this tax is designed to discourage consumption and protect public health.
Insurance Premiums and Revenue Concerns
During the GoM meeting, the Centre also proposed a complete GST exemption on health and life insurance premiums. Most states supported the idea but demanded strict monitoring of insurance companies to ensure that the benefit directly reaches customers. However, this exemption could lead to an annual revenue loss of nearly ₹9,700 crore for the government.
The GoM meeting included senior ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala. Along with Bihar’s Deputy CM Samrat Choudhary, the ministers debated the proposal and gave their consent to the Centre’s plan. They did this with some suggestions.
Final Decision by GST Council
The recommendations will now go to the GST Council, which is chaired by the Union Finance Minister. It includes finance ministers of all states and union territories. A final decision will be taken in the Council’s next meeting, expected in September or October 2025. If 75% of the Council members approve, the new tax rates will come into force after the Centre and states complete the required legal and technical changes.
Prime Minister Narendra Modi had hinted at these reforms during his Independence Day speech. He said that people would get a “big Diwali gift.” If the GST Council clears the proposal, the new rates could be implemented in early 2026. This would make everyday goods cheaper and provide direct relief to millions of households.
