GoM Clears Proposal to Scrap 12% and 28% GST Slabs, Majority of Goods Likely to Get Cheaper

GST Revamp: GoM Backs Two-Slab System, Cheaper Goods Ahead.

The long-awaited overhaul of the Goods and Services Tax (GST) has inched closer, with the Group of Ministers (GoM) on rate rationalisation approving a plan to slash the number of slabs from four to two.

At its meeting on Thursday, the panel of state finance ministers endorsed the Centre’s proposal to replace the existing 5%, 12%, 18% and 28% structure with just two main rates — 5% and 18%. The reform, dubbed GST 2.0, is aimed at simplifying compliance and reducing the burden on consumers and businesses.

What Changes Under GST 2.0?

• Scrapped slabs: 12% and 28% to be removed.
• Two main rates: 5% and 18% will apply to most goods and services.
• “Sin goods” & luxury cars: A 40% levy will continue on items like tobacco and high-end vehicles.

Shift in categories: Nearly 99% of items from the 12% slab will move to 5%, while about 90% of items from the 28% bracket will shift to 18%.

Relief for Consumers
Everyday essentials such as medicines, processed foods, clothing, footwear, and household products are expected to become cheaper under the 5% slab. Consumer durables like televisions and appliances, earlier taxed at 28%, will now be in the 18% bracket, cutting costs for middle-class families.

Finance Minister Nirmala Sitharaman said the revamp would “provide relief to the common man, farmers, the middle class and MSMEs, while ensuring a transparent and growth-oriented tax regime.”

Insurance Exemption Under Consideration
The GoM also discussed exempting health and life insurance premiums from GST. If cleared, policyholders would no longer pay tax on premiums — though states have sought safeguards to ensure insurers pass on the benefit to customers. The move could cost the exchequer around ₹9,700 crore annually.

Chaired by Bihar Deputy CM Samrat Choudhary, the GoM’s recommendations will now go before the GST Council for approval. If implemented, the two-slab system would mark the biggest reform since GST’s rollout in 2017, promising simpler compliance and cheaper goods for consumers.