The Goods and Services Tax (GST) is set for a major revamp as the Centre plans to introduce a simplified two-slab structure of 5% and 18%, along with a 40% rate for select sin goods such as tobacco and pan masala. The proposal—expected to be discussed in the GST Council’s September–October 2025 meetings—could take effect by Q3 FY 2025-26.
Under the plan, 99% of goods currently taxed at 12% will move to the 5% slab, while aspirational goods like TVs and refrigerators will drop from 28% to 18%. Essential food items will remain tax-free. The changes aim to boost demand, simplify compliance, and resolve disputes, particularly in sectors like agriculture, textiles, fertilisers, and renewable energy.
Procedural reforms include faster registration within 3 days, automated refunds, correction of inverted duty structures, and pre-filled returns to cut compliance burdens.
While a short-term revenue dip is possible, the government expects higher consumption and GDP growth to offset losses. Announced by PM Modi in his Independence Day 2025 address, the reform is positioned as a common man-friendly and business-friendly GST upgrade, targeting rollout before Diwali 2025 without amending the GST Act.
