GST Set for a Major Overhaul: Big Relief for Consumers Expected After September Council

MeetingNew Delhi: In what is being hailed as a landmark move, India's Goods and Services Tax (GST) regime is on the brink of its most significant transformation yet. Following Prime Minister Narendra Modi's recent announcement of "next-generation GST reforms," all eyes are now on the 56th GST Council meeting scheduled for September 3rd and 4th, 2025. This crucial meeting is expected to greenlight a comprehensive rate rationalization plan aimed at simplifying the tax structure, boosting consumption, and providing substantial relief to the common person.

The proposed changes, strategically timed ahead of the festive season, are being positioned as a "Diwali gift" to the nation, promising to lower the prices of numerous everyday goods and services.

Simplifying the Tax Structure: The Two-Slab Proposal

The cornerstone of the upcoming reforms is the proposed shift from the current multi-tiered tax structure to a much simpler two-slab system. The plan, which has reportedly received a nod from the Group of Ministers (GoM), aims to replace the existing 5%, 12%, 18%, and 28% slabs.

• New Proposed Slabs: The council will deliberate on collapsing the 12% and 28% slabs, leaving just two primary rates: 5% and 18%. This move is designed to reduce tax complexity, minimize classification disputes, and make the entire system more transparent and efficient for both businesses and consumers.

• Special Rate for Sin & Luxury Goods: While most goods will fall under the two main slabs, a higher "sin tax" of around 40% will likely be imposed on items considered detrimental to health, such as tobacco and pan masala, along with select luxury goods.

This structural overhaul is expected to rebalance the tax burden, making essential items more affordable while maintaining higher taxes on demerit goods.

What's Getting Cheaper? A Sector-Wise GST Breakdown

The rate rationalization will have a direct and positive impact on household budgets. Numerous items currently taxed at higher rates are expected to move to lower slabs, resulting in significant price drops.

• Big Relief on Insurance: One of the most celebrated proposals is the potential complete exemption of GST on life and health insurance policies. Removing the current 18% tax will make insurance significantly more affordable, encouraging wider coverage among the population.

• Construction and Real Estate Boost: The construction industry is poised for a major boost with the proposed cut in GST on cement from 28% to 18%. This long-standing demand, if met, will lower construction costs and make housing more affordable.

• Automobiles and Electronics: The automobile sector can expect a stimulus, with small cars and two-wheelers likely to see a tax reduction. Similarly, consumer durables like air conditioners, refrigerators, and televisions (up to 32 inches), currently in the 28% bracket, are expected to move to the 18% slab, making them cheaper for consumers.

• Daily Essentials and Services: Many everyday food items, including butter, ghee, cheese, and fruit juices, currently taxed at 12%, are slated to move to the 5% slab. Furthermore, common services like those offered at salons and beauty parlors could also see their tax rate drop from 18% to 5%.

Enhancing Compliance and Ease of Doing Business

Alongside the rate cuts, the government is focused on streamlining GST compliance to improve the ease of doing business. Recent advisories from the GST Network (GSTN) indicate a push towards greater discipline and transparency.

A key update involves a time limit on filing old returns. Starting July 2025, taxpayers will not be able to file returns for a specific tax period if it is more than three years past its due date. This move aims to curb non-compliance and ensure timely tax collection. Additionally, procedural tweaks, such as making auto-populated figures in GSTR-3B non-editable, are being implemented to reduce errors and ensure data integrity.

Conclusion: A Win-Win for Consumers and the Economy

The upcoming GST reforms represent a pivotal moment for India's indirect tax system. By simplifying the rate structure and reducing the tax burden on essential goods and services, the government aims to put more money in the hands of consumers, thereby driving demand and stimulating economic growth. The focus on simplifying compliance will further enhance the business environment. As the nation awaits the final decisions from the GST Council meeting in September, the outlook is overwhelmingly positive, promising a more efficient, transparent, and people-friendly tax regime for the future.

This video tells what major decisions can be taken in the next GST Council meeting, which can give relief to the common man.

See this report on GST Council meeting