Centre Proposes GST 2.0: 12% and 28% Slabs to Be Scrapped
99% of goods in 12% slab to move to 5% tax rate; 28% slab nearly eliminated as most items move to 18%
Aug 16, 2025 - The Central government has proposed a simplification of the Goods and Services Tax (GST) slabs by retaining the 5% and 18% slabs - 5% for common use items and 18% for other goods - and doing away with the 12% and 28% slabs. As per the proposal, 99% of the items currently in the 12% slab will be moved under the 5% bracket while 90% of goods and services in the 28% rate will be moved to 18%. Compensation cess will end ahead of the March deadline and there will be a special rate of 40% for luxury and “sin” goods
At present, the nil or zero per cent GST tax is charged on essential food items, 5% is charged on daily use items, 12% on standard goods, 18% on electronics and services, and 28% on luxury and "sin" goods.
The comprehensive revamp GST 2.0 plan was announced by Prime Minister Narendra Modi during his Independence Day speech at Delhi’s Red Fort on August 15. This, the PM said, will be part of a “Deepavali gift” from the Centre in the form of the “next-generation GST reforms” aimed to bring down “tax burden on the common man”.
According to the Ministry of Finance, the blueprint for GST2.0, eight years after its launch, will be discussed next week by a Group of Ministers (GoM), constituted by the GST Council to examine the proposal. The feedback from the GoM will be discussed by the GST Council in its next meeting later this year. Sources say the aim is to implement a majority of these reforms within this financial year itself.
According to a senior official, “Broadly, tax incidence will come down because rates on bulk of the items in 12% and 28% slabs will come down. The plan is to move 99% of the mass-use items in 12% slab to 5% bracket, with a small set moving to 18%. The proposed changes, which need to be endorsed by the GST Council, will end the patchwork that has been going on since 2017, with every meeting of ministers resorting to small tweaks. As a result, the weighted average tax rate, which had come down to 11.6%, will drop further.”
With Media Inputs
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