GST Revamp 2.0 Set to Simplify India’s Tax Structure
NEW DELHI : India is preparing for a major overhaul of its Goods and Services Tax (GST) regime. The Group of Ministers (GoM) on GST rate rationalisation has approved a plan to cut down the existing four-rate structure to just two main slabs. In a key meeting held on Thursday, the GoM agreed to scrap the 12% and 28% rates, retaining only 5% and 18% as the primary slabs.
The move marks the beginning of GST 2.0, which aims to create a simpler, more transparent, and consumer-friendly tax system. Officials say the reform will reduce compliance burden, lower household expenses, and provide relief to businesses, particularly MSMEs.
Two Slabs to Replace Four
Currently, GST is charged at four different rates: 5%, 12%, 18%, and 28%. The proposed structure will eliminate the middle two rates, moving most goods and services into either the 5% or 18% category.
Luxury items such as tobacco and high-end automobiles will continue to attract a higher 40% levy under the “sin goods” bracket. The panel has also recommended shifting luxury cars into this top-tier tax category.
According to estimates, 99% of products currently under the 12% slab will move to the lower 5% rate, while nearly 90% of items taxed at 28% will shift to 18%. This adjustment is expected to significantly reduce costs for consumers.
Who Was Part of the Decision?
The GoM was chaired by Bihar Deputy Chief Minister Samrat Choudhary. Other members included:
- Suresh Kumar Khanna, Uttar Pradesh Finance Minister
- Gajendra Singh, Rajasthan Health Minister
- Chandrima Bhattacharya, West Bengal Finance Minister
- Krishna Byre Gowda, Karnataka Revenue Minister
- K. N. Balagopal, Kerala Finance Minister
The ministers reviewed detailed proposals from the Finance Ministry before arriving at a consensus.
How the Changes Impact Consumers
The government has projected that the new GST structure will benefit households, farmers, and the middle class. Essential items such as medicines, footwear, clothing, processed food, and household goods are expected to fall under the 5% bracket.
Big-ticket purchases like televisions, refrigerators, and washing machines will now move to the 18% category, down from 28%. This could make durable goods more affordable for middle-income families.
Union Finance Minister Nirmala Sitharaman earlier said the rationalisation would bring “greater relief to the common man, farmers, the middle class, and MSMEs, while ensuring a simplified and growth-oriented tax regime.”
Insurance GST Exemption Under Review
The GoM also discussed exempting individual health and life insurance premiums from GST. If implemented, this measure could save policyholders 18% on their annual insurance costs.
However, officials estimate the move could cost the government about ₹9,700 crore in yearly revenue. While several states supported the exemption, they also sought safeguards to ensure insurers pass on the benefit to customers instead of retaining existing premium rates.
What Happens Next?
The recommendations of the GoM will now be sent to the GST Council, chaired by the Union Finance Minister and comprising state representatives. The Council is expected to take up the proposals in its upcoming meeting.
If approved, the reform would mark one of the most significant changes since GST was rolled out in July 2017. Experts believe the new two-slab system will make compliance easier for businesses while reducing the tax burden for millions of households across India.