Simplified GST Regime What You Need to Know

Simplified GST Regime: India Moves Towards Just Two Slabs

Simplified GST Regime: India Moves Towards Just Two Slabs

India is preparing for a major overhaul of its Goods and Services Tax (GST) system, aimed at simplifying compliance and reducing the burden on consumers and businesses. The new framework proposes to retain only two standard rates—5% and 18%—while removing the existing 12% and 28% brackets.

Key Updates in the New GST Structure

  1. Only Two Slabs Retained – 5% & 18%
    The existing four-tier system of 5%, 12%, 18%, and 28% will be streamlined into just two: 5% (essentials) and 18% (standard rate).

  2. 12% Bracket Items Moving to 5%
    Nearly 99% of goods and services currently taxed at 12% will now move down to the 5% rate, offering relief on several packaged goods and services.

  3. 28% Items Moving to 18%
    About 90% of products in the 28% slab, excluding sin and luxury goods, will shift to 18%.

  4. New Special Rate of 40%
    Luxury and sin goods like tobacco and pan masala will be taxed at 40%, with no cess on top—bringing transparency and removing multiple-layer taxation.

  5. No Additional Cess
    The new system eliminates cess over GST, making tax calculations straightforward for businesses and consumers alike.

Why This Matters

  • For Consumers: Prices of daily essentials, FMCG, and most services will fall as they move to a lower tax rate.

  • For Businesses: Simplified slabs mean easier invoicing, accounting, and compliance.

  • For the Economy: Short-term revenue dip (~₹50,000 crore) but higher consumption is expected to add ~0.6% to GDP growth.

  • For Festivals: With the rollout expected by Diwali, households can expect a festive boost in purchasing power.

Summary of Rate Changes

Current RateProposed RateItems Affected
5%5% (retained)Essentials & mass consumption goods
12%5%~99% of items (packaged foods, services)
18%18% (retained)Standard goods/services
28%18% (90% items)Automobiles, electronics, etc.
Sin/Luxury40% special rateTobacco, pan masala

What’s Next?

This GST revamp is being pitched as the biggest simplification since its launch in 2017. Businesses should begin evaluating their pricing and contracts in advance of the rollout.

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