Group of Ministers Approves Major GST Revamp: 12% and 28% Slabs to Be Scrapped, Majority of Goods to Get Cheaper
In a significant step toward simplifying India’s Goods and Services Tax (GST), the Group of Ministers (GoM) on GST rate rationalisation has approved a proposal to reduce the existing four-rate GST system to just two main slabs of 5% and 18%. This decision, made in a key meeting on Thursday, is set to impact everyday consumers and businesses positively by making 90% of goods more affordable.
GST 2.0: A Simpler Tax Regime
India currently follows a four-slab GST structure with rates at 5%, 12%, 18%, and 28%. The GoM’s historic decision will eliminate the 12% and 28% tax slabs. Going forward, most goods and services will be taxed either at a lower rate of 5% or a standard rate of 18%. A higher rate of 40% will remain only for “sin goods” such as tobacco and selected luxury items, including luxury cars now slated to fall under this highest tax bracket.
Major Shifts in Tax Rates
Almost 99% of goods previously taxed at 12% will be moved down to the 5% slab, easing the tax burden on everyday items.
Nearly 90% of products that attracted the 28% GST will now be taxed at 18%, offering relief on several durable and household goods.
Who Made the Decision?
The GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, comprises prominent state ministers including:
Uttar Pradesh Finance Minister Suresh Kumar Khanna
Rajasthan Health Minister Gajendra Singh
West Bengal Finance Minister Chandrima Bhattacharya
Karnataka Revenue Minister Krishna Byre Gowda
Kerala Finance Minister K N Balagopal
The ministers arrived at a broad consensus after reviewing a detailed proposal by the Finance Ministry, marking a unified approach across diverse states.
What Does This Mean for Consumers?
The Centre has assured that the revised GST rates will benefit households, farmers, and the middle class by lowering taxes on essential goods. Items such as medicines, processed foods, clothing, footwear, and many household products are expected to be taxed at the reduced 5% rate. Meanwhile, durable goods like large household appliances and televisions will move from 28% to 18%, which is likely to reduce prices and provide relief to middle-income families.
Finance Minister Nirmala Sitharaman stated,
“The rate rationalisation will provide greater relief to the common man, farmers, the middle class and MSMEs, while ensuring a simplified, transparent and growth-oriented tax regime.”
GST Exemption on Insurance Under Review
The GoM also discussed exempting health and life insurance policies for individuals from GST. If approved by the GST Council, policyholders would no longer pay GST on their premiums. However, this could reduce government revenue by an estimated ₹9,700 crore annually. Most states supported the exemption but called for a mechanism to ensure that benefits are genuinely passed on to policyholders rather than being absorbed by insurers.
What’s Next?
The GoM’s recommendations will now be forwarded to the GST Council, chaired by the Union Finance Minister, where representatives from all states will review and take the final decision in the upcoming meeting.
If implemented, this GST overhaul will be one of the most significant tax reforms since GST’s introduction in 2017. The transition to a two-slab system aims to simplify tax compliance for businesses and ease consumers’ tax burden, heralding a new era of GST 2.0 for India’s economy.
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