A Festival Gift in the Form of Simplified Tax?
As Diwali 2025 approaches, the Indian government is preparing a significant restructuring of the Goods and Services Tax (GST) system. According to NDTV Profit, a proposal is underway to replace the existing four-slab system with a simplified two-slab structure of 5% and 18%, eliminating the 12% and 28% rates entirely.
This bold move could reshape how India taxes its goods and services, offering relief to consumers and reducing compliance complexities for businesses.
📊 Key Highlights of the Proposed GST Overhaul
| Aspect | Current Rate | Proposed Change |
|---|---|---|
| Middle Slabs | 12% & 28% | To be eliminated |
| Lower Slab Items | 12% | 99% will shift to 5% |
| White Goods (ACs, TVs, etc.) | 28% | Will move to 18% |
| Services | Mostly 18% | No change; Insurance may drop to 5% |
| Sin Goods (Tobacco, Pan Masala) | Varies + Cess | Special 40% GST bracket |
| Labour-Intensive Sectors | Mixed | Limited concessional rates proposed |
| Precious Metals | Gold, Silver – 3% | No change proposed |
| Diamonds | 0.25% | May move to 0.5% |
| Petroleum Products | Out of GST | Will remain outside GST |
🧠 Why This Matters: Strategic Timing + Economic Impact
✅ 1. Simpler Compliance = Better Business
A two-slab structure reduces classification disputes, errors in GST returns, and litigation — especially important for MSMEs.
✅ 2. Boost to Consumer Sentiment
Lower tax rates on home appliances, food, medicines, and insurance could spur spending, especially during Diwali — a ₹4.25 lakh crore consumption season (as per MarketBrew.in).
✅ 3. Equity & Efficiency Balance
By keeping sin goods like tobacco and pan masala under a punitive 40% slab while offering relief on essentials, the system aims for fiscal neutrality with social equity.
🚧 What Stays Unchanged (For Now)
- Petroleum products, a major contributor to state revenues, will remain outside GST, due to fiscal complexities and central-state negotiations.
- Most services, especially telecom, logistics, and professional services, will continue at 18%.
🔍 Context: GST Council’s Direction Since 2024
This overhaul follows the policy direction seen in the 55th GST Council Meeting (December 2024, Jaisalmer), where rate rationalisation was a key agenda. The CBIC and Ministry of Finance have since been analysing revenue data and compliance patterns to justify such changes — supported by ClearTax’s 2025 updates and industry insights.
📣 Final Word: A Step Toward GST 2.0?
This proposal reflects a maturing GST regime in India — one that aligns more with global best practices by simplifying slabs, reducing friction, and promoting fair taxation. While the full implementation may depend on Council consensus and industry consultations, the direction is clear:
India is moving toward a more efficient, taxpayer-friendly GST system — and Diwali 2025 might just mark that turning point.
✍️ Need Help Adjusting Your Business GST Strategy?
Whether you’re a manufacturer, retailer, or service provider — this change could affect your pricing, input credit, or compliance processes. At Efiletax, our experts stay on top of every GST Council update to ensure you’re always compliant and optimised.
📞 Contact us today to schedule a free GST impact consultation.