GST rate rationalisation likely in 9th year: What it means for you
The focus keyphrase GST rate rationalisation is back in headlines as the indirect tax system enters its 9th year. With GST revenue stabilising and compliance improving, the long-awaited rationalisation may finally be on the table — affecting everything from your everyday bills to business pricing strategies.
Let’s break it down.
Why GST rate rationalisation matters
The Goods and Services Tax (GST), rolled out on 1st July 2017, replaced a web of Central and State taxes. But instead of a single rate, India adopted a multi-rate structure:
- 0%, 5%, 12%, 18%, and 28%
- Additional cess on luxury/sin goods
This structure brought in complexity, classification disputes, and rate anomalies.
Now, the GST Council, backed by the 15th Finance Commission, is seriously considering rate rationalisation — a simpler structure with fewer slabs.
What changes are expected?
While no final blueprint is released, expert reports and council discussions suggest:
| Current Structure | Proposed Rationalisation |
|---|---|
| 4 main slabs (5%, 12%, 18%, 28%) | Likely merger of 12% and 18% into a single mid-rate |
| Complicated rate fitments | Uniform rates across categories |
| Multiple exemptions | Possible pruning of exemption list |
The Group of Ministers (GoM) on Rate Rationalisation, formed in 2021, has submitted internal recommendations to the Council, which may get implemented post-elections, in FY 2025–26.
What triggers the timing now?
- Record GST revenues: Monthly GST collections consistently crossing ₹1.7 lakh crore
- Stable compliance: E-invoicing, GSTR-3B reforms, AI-based analytics reducing evasion
- Industry pressure: Businesses want fewer classification issues and reduced litigation
- International benchmarking: India has more slabs than most major economies
The 53rd GST Council Meeting (held 22 June 2024) didn’t take a final call but hinted at post-election momentum towards simplification.
Legal basis for GST rate rationalisation
The GST Council (Article 279A of the Constitution) has the power to recommend:
- Tax rates
- Exemptions
- Thresholds
- Special rates for sectors
These decisions are notified via Section 9 of CGST Act, 2017 and Section 5 of respective SGST Acts through official rate notifications.
Implementation needs:
- Council recommendation
- Central & State government notifications
- Potential legislative amendments if needed
📄 Refer: CBIC Notification Index for past rate changes.
Expert View: Impact across sectors
According to tax professionals:
“Rate rationalisation is not just about simplification — it can fix inverted duty structures and boost Make in India.”
— S. Ramesh, Ex-Chairman, CBIC
Sectors likely to benefit:
- Textiles & footwear: currently facing inverted duty structure
- FMCG & restaurant services: frequent rate disputes
- Small traders: easier classification under fewer slabs
Compliance tips for businesses
If rate rationalisation happens in FY 2025–26, businesses must:
- Update billing software for new rates
- Review contracts and pricing models
- Check reverse charge liabilities under new structures
- Communicate clearly with customers on price revisions
- Consult your tax advisor early for impact planning
FAQs on GST rate rationalisation
Q1. Will all slabs be removed?
No. The idea is to reduce slabs, not eliminate them. Luxury goods may still attract 28% + cess.
Q2. Will compliance get easier?
Yes. Fewer rates mean fewer disputes, better fitment clarity, and smoother return filing.
Q3. When is the change expected?
Possibly from April 2025 or in Budget 2026, depending on GST Council consensus.
Summary
India may reduce GST rate slabs in FY 2025–26 to simplify the tax structure. Expected reforms include merging 12% and 18% slabs, pruning exemptions, and fixing inverted duty issues. Businesses should prepare early for pricing and software updates.
Final thoughts
GST rate rationalisation could be a major reform in India’s tax journey. It won’t just help the government — it could bring predictability, reduce litigation, and make life easier for every taxpayer.
Need help navigating rate changes or GST compliance?
Efiletax can handle your GST filings, notices, and advisory.