Government prepares for major GST slab reduction ahead of festive season
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The government is gearing up to implement one of the biggest tax reforms since the introduction of the Goods and Services Tax (GST) in 2017. A high-level meeting of ministers held on Wednesday and Thursday reached broad consensus on reducing GST slabs, paving the way for cheaper prices on a wide range of goods and services.
If the proposals move forward, the highest GST rate will be capped at 18%, with the current 28% and 12% slabs likely to be scrapped. This means several everyday items, from household appliances to packaged food, could become more affordable just in time for Diwali.
Prime Minister Narendra Modi had hinted at this major relief during his Independence Day speech on August 15, promising “double benefits” for citizens during the festive season.
What the Proposed GST Changes Mean
According to Bihar Finance Minister Samrat Choudhary, the government is considering eliminating the 12% and 28% GST slabs. “The proposal has been supported in principle, and the GST Council will now take the final decision,” he said after Thursday’s meeting.
Under this reform, goods and services currently taxed at 28% would fall into the 18% category, while items in the 12% bracket may be shifted downwards.
Punjab Finance Minister Harpal Singh Cheema explained that insurance could see the biggest relief. “Life and health insurance premiums have been under GST since 2017. If this burden is removed, consumers will benefit directly,” he said.
Relief Likely for Key Sectors
If the Council approves the changes, everyday expenses could drop significantly.
- Luxury and household items: Motorcycles, bicycles, select motor vehicles, tractors, irrigation equipment, air conditioners, ceiling fans, and electrical appliances may all shift from the 28% slab to 18%, reducing prices.
- Essential food products: If the 12% slab is scrapped, consumers may see lower costs on condensed milk, butter, ghee, spreads, dates, jams, fruit jellies, nuts, diabetic-friendly foods, and packaged items.
- Healthcare: Removal of GST from life and health insurance would make policies more affordable for millions.
- Medical essentials: Items like oxygen for treatment may also see reduced taxation, improving affordability.
These revisions could help households save money at a time when inflation and rising living costs remain pressing concerns.
Opposition and States Raise Concerns
While the central government has presented the proposal as a festival “gift,” states like Punjab remain skeptical. Cheema accused the Centre of failing to fully compensate states for GST-related revenue losses. “Punjab has received ₹60,000 crore so far, but we are still owed another ₹50,000 crore,” he alleged.
Critics argue that although GST was introduced as a “one nation, one tax” reform, states have lost significant financial autonomy, especially in revenue-heavy sectors. Many opposition-led states continue to demand compensation mechanisms and greater flexibility in rate-setting.
A Brief History of GST in India
The GST was rolled out at midnight on July 1, 2017, replacing a complex web of central and state-level taxes with a unified system. It was promoted as India’s biggest tax reform, designed to simplify compliance and promote ease of doing business.
Initially, GST was divided into four main slabs: 5%, 12%, 18%, and 28%, with some special rates such as 3% for gold and precious stones, and 1% for small-scale items. Essential goods like food items, fertilizers, coal, and railway economy travel fall under the 5% slab, while luxury items like high-end vehicles, ACs, refrigerators, and tobacco attract 28%.
Over the years, the Council has revised GST rates more than 25 times, often reducing rates for consumer goods under political and public pressure.
How GST Rate Changes Are Decided
The GST Council, comprising finance ministers from the Centre and states, decides on rate changes. Proposals require more than 50% of the votes to pass, with each state having one vote. However, critics note that the Centre’s larger influence often ensures its proposals move forward.
Former Jharkhand Finance Minister Rameshwar Oraon explained that states have limited powers within GST. “We cannot control GST rates, except on petrol, diesel, and liquor, which remain outside GST. These are crucial for state revenues, so states are reluctant to surrender them,” he said.
This lack of flexibility has fueled opposition criticism that GST is more complex than promised and reduces state autonomy.
What Consumers Can Expect This Diwali
If approved, the upcoming GST reform will simplify India’s tax structure from four slabs to just two – 5% and 18%. This move could:
- Lower household expenses – from food items to electronic appliances.
- Boost insurance affordability – encouraging more families to opt for life and health coverage.
- Stimulate demand – as lower taxes make consumer goods more accessible, potentially supporting economic growth.
However, the impact on state revenues and the Centre’s ability to compensate them remains an open question.
Conclusion
India’s GST reform is poised for its biggest overhaul since its launch eight years ago. By reducing slabs and capping the highest rate at 18%, the government aims to deliver festive relief to households while simplifying tax compliance.
Whether this “Diwali gift” translates into long-term stability for consumers and businesses will depend on how effectively the Centre manages state concerns and ensures revenue balance. For now, citizens can look forward to a festive season with lighter bills and potentially brighter celebrations.
