August 21, 2025–
The government has taken a decisive step towards simplifying India’s indirect tax system by approving the removal of the 12% and 28% Goods and Services Tax (GST) slabs. This move is expected to reduce the tax burden on many goods, with the majority now falling under the 5% and 18% tax categories
The decision was endorsed by the Group of Ministers (GoM), which oversees GST rate rationalisation. Officials explained that most items currently taxed at 12% will shift to the 5% slab, while a large portion of goods previously under the 28% rate will now be taxed at 18%. The reform is intended to make the taxation process simpler for businesses and more transparent for consumers.
Government sources indicated that the move forms part of a broader strategy to improve the efficiency of the GST system and ease compliance challenges. In addition, the authorities are evaluating the introduction of a 40% tax on luxury products and certain “sin” items, including tobacco and pan masala.
Economic analysts believe that the rationalisation could result in noticeable price reductions for many products, benefiting households and smaller businesses. Traders have welcomed the plan, citing that fewer tax brackets will simplify billing, accounting, and overall tax management.
The final approval of this proposal lies with the GST Council, which is expected to meet before Diwali. Experts anticipate that the council will likely endorse the changes, aligning with the government’s goal to streamline GST rates and create a more predictable tax environment.
Conclusion:
If implemented, this reform could be one of the most significant adjustments to India’s GST structure in recent years. By consolidating slabs and reducing tax rates on numerous goods, the government aims to ease the financial burden on consumers, simplify compliance for businesses, and promote a more efficient taxation system.
