GST Council to Take Up Rate Cuts and Rationalisation - Here’s What to Expect
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Finance Minister Nirmala Sitharaman will chair the 58th GST Council meeting today and tomorrow, setting the stage for one of the biggest tax reforms since GST’s launch in 2017. The meeting will shape Prime Minister Narendra Modi’s call for rationalisation, focusing on rate cuts, a simpler tax structure, and relief for industries and consumers alike.
A Simpler GST Framework
Currently, GST operates under four slabs-5%, 12%, 18% and 28%. The proposal on the table is to shrink this into a two-tier system:
Additionally, a 40% “sin goods” slab is being considered for products like tobacco, luxury cars above ₹50 lakh, and premium two-wheelers. An officers’ panel has already backed this move, setting the tone for a historic overhaul.
Consumers are likely to be the biggest winners, with GST on daily-use products set to drop significantly:
This could boost FMCG players like Hindustan Unilever, Godrej Consumer, and Nestlé India, while also offering relief to households grappling with inflation.
This move is expected to stimulate demand in both consumer durables and housing.
However, the Council may impose a 40% GST on high-end two-wheelers with engine capacity above 350 cc, a move opposed by Bajaj Auto and Royal Enfield.
This could be a setback for Tata Motors and Mahindra, while benefiting traditional automakers.
If approved, this restructuring could mark the most significant shift in GST since its rollout, reshaping India’s consumption and industry landscape.
Simpler Structure: The current four slabs-5%, 12%, 18% and 28%-may be merged into two broad rates: 5% for essentials and 18% for non-essentials, with a special 40% slab for luxury and sin goods.
Ease of Compliance: Fewer categories mean simpler filing, reduced litigation, and more efficient tax administration, making it easier for businesses to operate.
Balancing Revenue: The higher 40% slab is designed to make up for revenue losses from lower GST on essentials and mass-consumption items.
Support for States: A cess surplus of ₹40,000-50,000 crore is being considered to compensate states, with plans to phase out this mechanism by 31 October. Meanwhile, the insurance industry has sought exemptions and urged that tax benefits be passed on to policyholders.
Fixing Duty Inversion: The Council will also discuss the inverted duty structure, where inputs are taxed higher than outputs. Aligning these rates could reduce costs and ensure consumers actually see the benefit of lower GST.
Disclaimer: The information presented in this article is based on reports, official statements, and industry inputs available at the time of writing. Final decisions and announcements will be made by the GST Council. Readers are advised to refer to official government notifications for accurate and updated details.
A Simpler GST Framework
Currently, GST operates under four slabs-5%, 12%, 18% and 28%. The proposal on the table is to shrink this into a two-tier system:
- 5% slab for essential goods
- 18% slab for non-essentials
Additionally, a 40% “sin goods” slab is being considered for products like tobacco, luxury cars above ₹50 lakh, and premium two-wheelers. An officers’ panel has already backed this move, setting the tone for a historic overhaul.
Everyday Essentials May Get Cheaper
Consumers are likely to be the biggest winners, with GST on daily-use products set to drop significantly:
- Toothpaste, soaps, shampoo, talcum powder may move from 18% to 5%.
- Butter, cheese, pickles, chutneys and other ready-to-eat foods could fall under the 5% slab.
- Nearly all food and textile items are expected to benefit.
This could boost FMCG players like Hindustan Unilever, Godrej Consumer, and Nestlé India, while also offering relief to households grappling with inflation.
White Goods and Cement Relief
Electronics and housing material are also in focus:
- TVs, refrigerators, air-conditioners, and washing machines may shift from 28% to 18% GST.
- Cement, currently under the 28% slab, could also drop to 18%, bringing much-needed relief to the real estate and construction sectors.
This move is expected to stimulate demand in both consumer durables and housing.
Auto Industry in the Spotlight
The automobile sector faces a mix of gains and challenges:
- Small petrol cars (up to 1,200 cc) and small hybrid cars may see GST cut from 28% to 18%, a boost for Maruti Suzuki and Toyota.
- Two-wheelers may finally see GST reduced to 18% from 28%, a relief for Hero MotoCorp and other players.
However, the Council may impose a 40% GST on high-end two-wheelers with engine capacity above 350 cc, a move opposed by Bajaj Auto and Royal Enfield.
A Twist for Electric Vehicles
Electric vehicles, which currently enjoy a 5% GST, may see a surprising shift:
- EVs priced between ₹20–40 lakh could move up to the 18% slab.
- Luxury EVs from brands like Tesla and BYD may face the 40% slab.
This could be a setback for Tata Motors and Mahindra, while benefiting traditional automakers.
Why These Reforms Matter
The twin goals of this meeting are simplification and growth:
- Consumers could see reduced prices on essentials and big-ticket items.
- Businesses across FMCG, housing, and automobiles may gain a competitive edge.
- The government aims to balance lower rates with revenue needs, while ensuring states get fair compensation.
If approved, this restructuring could mark the most significant shift in GST since its rollout, reshaping India’s consumption and industry landscape.
What GST Rationalisation Could Look Like
Simpler Structure: The current four slabs-5%, 12%, 18% and 28%-may be merged into two broad rates: 5% for essentials and 18% for non-essentials, with a special 40% slab for luxury and sin goods.
Ease of Compliance: Fewer categories mean simpler filing, reduced litigation, and more efficient tax administration, making it easier for businesses to operate.
Balancing Revenue: The higher 40% slab is designed to make up for revenue losses from lower GST on essentials and mass-consumption items.
Support for States: A cess surplus of ₹40,000-50,000 crore is being considered to compensate states, with plans to phase out this mechanism by 31 October. Meanwhile, the insurance industry has sought exemptions and urged that tax benefits be passed on to policyholders.
Fixing Duty Inversion: The Council will also discuss the inverted duty structure, where inputs are taxed higher than outputs. Aligning these rates could reduce costs and ensure consumers actually see the benefit of lower GST.
Disclaimer: The information presented in this article is based on reports, official statements, and industry inputs available at the time of writing. Final decisions and announcements will be made by the GST Council. Readers are advised to refer to official government notifications for accurate and updated details.
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