GST Reforms 2025: Now only two tax slabs 5% and 18%, heavy 40% tax on luxury | GST Reforms New Slabs to Introduce Two Category 5 And 12 Percent Possible

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GST Reforms 2025: The Center made a big proposal of GST reforms. It is believed that only 5% and 18% tax slabs will remain, 40% tax on Luxury and Sin Goods. PM Modi announced on Independence Day, GST Council will approve in September-October.

GST reforms 2025: Preparations for major changes of GST (Goods and Services Tax) have started in India. The Center has proposed that now only two slabs will remain 5% and 18%, which will make tax structure easier. However, the central government has not yet officially announced two slabs. But it is believed that only two slabs of GST will remain.

What is the new GST Proposal?

  • 90% iTems in 28% Slab will be shifted to 18% Slab.
  • 99% iTems coming in 12% Slab will be brought to 5% Slab.
  • 40% special rate will be applied to Luxury and Sin Goods (tobacco, gutkha, cigarettes).
  • 40% category will have only 5-7 items which will not include items like refrigerators, AC, washing machines.
  • Petroleum products will still be outside the GST.
  • The current rates will continue on diamonds and precious stones such as export-oriented sectors.

Effect on revenue and consumption

According to data from the Ministry of Finance, 67% GST Revenue comes from 18% slab while 28%, 12% and 5% Slabs come from 11%, 5% and 7% revenue respectively. The government believes that this change will boost consumption and will also balance revenue loss.

PM Modi said ‘double Diwali gift’

In the Independence Day speech, PM Modi described GST reforms as ‘double Diwali gift’ which will directly benefit common man, women, students, middle class and farmers. PM Modi said that this will reduce the tax burden across the country. This will reduce tax on common-use items. He reminded that GST came into force on 1 July 2017 and now after eight years its time has come for its review. For this, High-Powered Committee was created and a new reform package was prepared after consulting the states. The Central Government has prepared a three-3-pillar blueprint for these reforms and sent it to the Group of Ministers (GOM), which GST Council will take for discussion in its next meeting.

The GST Council, which includes Finance Ministers of all states, can approve the proposal by meeting in September or October. GST was launched in 2017.

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