New Delhi – Finance Minister Nirmala Sitharaman is expected to unveil a sweeping overhaul of India’s indirect tax system as the 56th GST Council meeting begins on Wednesday. The two-day session will give shape to Prime Minister Narendra Modi’s call for significant GST reforms.
According to government sources, the reforms could bring the most dramatic change since GST was introduced in 2017. The proposal under consideration seeks to cut the existing four slabs to just two, aimed at simplifying the structure and easing compliance.
The plan suggests removing the 12% and 28% slabs, while retaining 5% and 18% as the primary rates. Nearly 99% of items currently taxed at 12% are likely to move to the 5% category, providing relief on several essential goods. Meanwhile, about 90% of items in the 28% slab, including many consumer products, could shift down to 18%.
To address revenue concerns, a new 40% GST slab is being considered exclusively for so-called “sin goods” such as tobacco and pan masala. Officials said this would balance revenue needs while making the system more rational and consumer-friendly.
Speaking in Chennai ahead of the meeting, Sitharaman said the reforms will “reduce compliance burden and promote ease of doing business.” On August 21, the Group of Ministers endorsed the move to remove the 12% and 28% categories, setting the stage for the Council’s decision.
If approved, the restructuring could mark a turning point in GST’s evolution, making India’s tax regime simpler and more predictable for businesses and consumers alike.
