Govt Proposes Two GST Slabs Of 5% And 18%; Sin Goods May Face 40% Levy
The Centre is considering a major simplification of the GST structure, proposing a shift from the existing four slabs to just two — 5% and 18%, with a special higher rate for sin and luxury goods, sources told CNN-News18.
According to officials, nearly 99% of items currently under the 12% slab will move to 5%, while about 90% of items in the 28% slab will be brought down to 18%. The government said the move is aimed at easing compliance, lowering the tax burden on the common man, and boosting consumption.
A statement from the Finance Ministry, issued after Prime Minister Narendra Modi’s Independence Day address, said that GST reforms would be rolled out by Diwali, promising relief for households and small industries.
The proposal rests on three key pillars:
- Structural reforms in the GST system
- Rate rationalisation to reduce taxes on essential and aspirational goods
- Ease of living for citizens and simplification for businesses
While most goods will get cheaper, the Centre has suggested a special rate of 40% for a select few items categorised as “sin goods” and luxury products such as tobacco, pan masala and certain high-end items.
The Finance Ministry has submitted its proposal to the Group of Ministers (GoM) formed by the GST Council, which is expected to take up the matter in its upcoming meeting in September.
At present, GST follows a four-tier structure of 5%, 12%, 18% and 28%, with essentials either exempt or taxed at the lowest rate, and demerit items taxed at the highest slab along with a compensation cess.
If approved, the two-slab GST system would mark one of the biggest reforms since GST’s rollout in 2017, potentially reshaping India’s indirect tax regime.
