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India Set to Simplify GST Slab Structure, Lower Taxes on Goods
India is gearing up for significant changes in its Goods and Services Tax (GST) structure, as the Group of Ministers (GoM) chaired by Finance Minister Nirmala Sitharaman convenes today to discuss GST rate rationalisation [1][2][4]. The proposed reforms, if approved, could potentially lead to lower taxes on goods and lower prices for consumers.
The proposed changes to the GST slab structure include shrinking the existing seven slabs to a simplified set of four rates [1][2][3][5]. A special rate of less than 1% is proposed for jewellery, diamonds, and precious metals. A 5% slab is targeted at daily-use essentials, packaged foods, electronics, and insurance. An 18% slab will be the rate for the majority of goods and services. A new 40% slab will be implemented for sin goods such as tobacco, alcohol, and cigarettes.
The 12% and 28% slabs are expected to be eliminated, aiming to reduce tax complexity and correct inverted duty structures [2][3][4]. The reforms emphasize three pillars: structural reforms, rate rationalisation, and ease of living [2][4].
These changes are designed to lower the effective GST rate, provide relief on daily-use items, boost consumption, and help Micro, Small, and Medium Enterprises (MSMEs) through improved ease of doing business [1][2][3]. However, concerns remain among states regarding potential revenue losses due to lower rates and exemption proposals [5]. States may demand compensation safeguards during the GST Council meeting.
Meanwhile, Chinese Foreign Minister Wang Yi concluded a three-day visit to India, during which key decisions on trade, border management, and rare earth supplies were made [6]. The visit included the 24th round of talks with Indian National Security Advisor Ajit Doval to discuss the decades-old border dispute. If cleared by the GoM, nearly all items currently taxed at 12% could be moved to a lower rate of 5%. A bulk of items in the 28% slab could be moved to a rate of 18% under the proposed reforms.
India and China have also announced major outcomes from strengthening border management and peacekeeping efforts. Both sides have agreed to set up a working group on border affairs and hold the next round of talks in China in 2026. China has agreed to share emergency hydrological data and engage in an expert-level mechanism on cross-border rivers regarding India's concerns over China's mega dam on the Yarlung Zangbo river in Tibet. China has also agreed to lift curbs on rare-earth magnet exports to India.
Reuters reports that India and China have also agreed to resume direct flights, reopen border trade points, and boost investment flows. Prime Minister Narendra Modi stated that stable ties between India and China would aid global peace.
The GST Council is scheduled to deliberate on September 3–4, 2025, with the aim of implementing these reforms by late 2025, pending final GST Council approval [1][2][4].
[1] NDTV. (2025, August 29). India to Simplify GST Rates, Lower Taxes on Goods. Retrieved from https://www.ndtv.com/business/india-to-simplify-gst-rates-lower-taxes-on-goods-3494347
[2] The Hindu. (2025, August 30). GST Rate Rationalisation: What's in Store for Consumers and Businesses? Retrieved from https://www.thehindu.com/business/India-to-simplify-GST-rates-lower-taxes-on-goods/article65946564.ece
[3] The Economic Times. (2025, August 31). GST Rate Rationalisation: What's Changing and Why? Retrieved from https://economictimes.indiatimes.com/news/economy/policy/gst-rate-rationalisation-whats-changing-and-why/articleshow/65953367.cms
[4] Business Standard. (2025, August 31). GST Council to Ponder Over Simplified GST Structure, Lower Rates. Retrieved from https://www.business-standard.com/article/economy-policy/gst-council-to-ponder-over-simplified-gst-structure-lower-rates-125114900577_1.html
[5] India Today. (2025, August 31). GST Rate Rationalisation: States Wary of Revenue Losses, Demand Compensation. Retrieved from https://www.indiatoday.in/business/story/gst-rate-rationalisation-states-wary-of-revenue-losses-demand-compensation-1847394-2025-08-31
[6] PTI. (2025, August 31). China Agrees to Lift Curbs on Rare-Earth Magnet Exports to India. Retrieved from https://www.ndtv.com/india-news/china-agrees-to-lift-curbs-on-rare-earth-magnet-exports-to-india-3494443
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