GST Rate Cuts Coming Soon! Goods and Services Tax Council to Meet for 2-Day Session Starting Sept 3; Two-Slab Structure in Works

GST Rate Cuts Coming Soon! Goods and Services Tax Council to Meet for 2-Day Session Starting Sept 3; Two-Slab Structure in Works

 The Goods and Services Tax (GST) has been one of the most significant reforms in India’s indirect taxation system. Introduced in July 2017, GST replaced a complex web of central and state taxes with a unified structure, making tax collection simpler and more transparent. Over the years, however, industries, consumers, and policymakers have debated the need for rationalization of GST rates to make the system more efficient.

 

Now, all eyes are on the upcoming GST Council meeting scheduled for September 3 and 4, which could bring major changes in the GST rate structure. Reports suggest that the Council may finally move towards a two-slab structure and announce rate cuts on certain items to boost consumption, ease inflation, and reduce disputes.

 

In this article, we’ll break down what to expect from the meeting, why a two-slab GST structure is under discussion, and what it means for businesses, consumers, and the Indian economy.

 

What Is the GST Council?

 Before diving into the details, it is important to understand the role of the GST Council.

The GST Council is a constitutional body headed by the Union Finance Minister.

 It includes finance ministers from all states and union territories.

The Council makes decisions on tax rates, exemptions, and other aspects of GST.

Every key reform or change in GST rates must be approved by the Council, making it one of the most important decision-making bodies in India’s taxation system.

 

Current GST Structure in India

 At present, GST is divided into multiple slabs:

0% GST (Nil) – For essential goods like fresh fruits, vegetables, milk, and grains.

5% GST – For daily-use essentials and certain services.

12% GST – For processed foods, mobile phones, and some household products.

18% GST – The most common slab, covering consumer goods, restaurants, and services.

28% GST + cess – For luxury items like automobiles, tobacco, and high-end goods.

While this system covers the diversity of India’s economy, businesses and economists have argued that multiple slabs create complexity, disputes, and classification issues.

 

Why a Two-Slab GST Structure Is Being Discussed

The government and policymakers are considering a two-slab GST structure to simplify taxation. The idea is to merge some of the slabs into broader categories to reduce confusion.

 

1. Simplification of Tax System

With fewer slabs, businesses will find it easier to classify goods and services. This reduces disputes and litigation.

 

2. Ease of Compliance

 A simpler system reduces compliance burdens for small businesses and startups, encouraging entrepreneurship.

 

3. Boosting Consumption

Rate cuts on essentials and mass-consumption goods will leave more money in people’s hands, stimulating demand.

 

4. Global Competitiveness

A uniform and simplified GST system improves India’s competitiveness and ease of doing business globally.

 

Possible Structure of the New Two-Slab GST

While the final decision rests with the Council, experts believe the new structure may look like this:

 

Lower Slab (~8-10%) – For essential and mass-consumption items.

 

Higher Slab (~16-18%) – For standard goods and services.

 

Luxury & Sin Goods – Likely to remain at 28% with cess (for items like cars, cigarettes, aerated drinks).

 

This way, the government maintains revenue neutrality while making the system easier for businesses and consumers.

 

Key Expectations from the September 3-4 GST Council Meeting

 

The upcoming meeting is being watched closely by businesses, economists, and ordinary citizens. Here are the key issues on the agenda:

 

1. Rate Cuts on Essential Goods

 

Industries and consumers expect a reduction in GST rates on certain daily-use items. For example:

 

Packaged food products

 

Household appliances

 

Consumer electronics

 

This could help lower inflation and make goods more affordable.

 

2. Reduction in GST on Insurance and Healthcare

The insurance sector has been pushing for lower GST rates on health and life insurance premiums. Currently, these attract 18% GST, which makes policies costly. A reduction could increase penetration.

 

3. Rationalization for Automobiles

The automobile industry, a major contributor to India’s GDP, has been struggling with high taxes. Currently, cars fall in the 28% slab + cess, which makes them expensive. The Council may consider rationalizing this to revive demand.

 

4. Clarity on Online Gaming & Betting

Recent changes have imposed 28% GST on online gaming and betting. However, there has been confusion and pushback from the industry. The Council may provide further clarity.

 

5. Simplification of Return Filing

 

Small and medium businesses expect relief in GST return filing procedures. Automation and digitalization measures may be announced.

 

Why Businesses Welcome GST Rate Cuts

 

Businesses across sectors have long demanded GST rationalisation. Here’s why:

 

Lower tax burden means higher demand and sales.

 

Less litigation as classification disputes between 12% and 18% slabs will vanish.

 

Improved cash flow for small and medium enterprises.

 

Boost to exports as lower input costs make Indian goods more competitive globally.

 

What It Means for Consumers

 

For ordinary citizens, GST rate cuts mean:

 

Cheaper Goods and Services – From food to household appliances, prices may fall.

 

Higher Affordability of Insurance – Health and life insurance could become more affordable if rates are reduced.

 

Lower Inflation Impact – With essential items getting cheaper, household budgets will get relief.

 

Boost in Purchasing Power – More disposable income will encourage higher spending, benefiting the economy.

 

Challenges in Moving to a Two-Slab GST

 

While the idea is attractive, moving to a two-slab structure is not without challenges.

 

1. Revenue Neutrality

 

The government must ensure that rate cuts do not lead to massive revenue losses. GST collections are a major source of income for both the Centre and states.

 

2. State Resistance

 

Some states may oppose rate cuts because they rely heavily on GST revenue. Balancing state and central interests will be key.

 

3. Impact on Luxury Goods

 

Keeping luxury goods at 28% may discourage demand in certain industries like automobiles and real estate.

 

4. Transition Period Issues

 

Businesses will need to adapt billing systems, software, and accounting methods to the new structure.

 

Expert Opinions on the Two-Slab Structure

 

Economists: Many believe that rationalization is overdue and will benefit the economy, provided revenue neutrality is maintained.

 

Industry Leaders: Sectors like FMCG, insurance, and automobiles are strongly in Favour of a lower slab.

 

Tax Analysts: They caution that sudden changes could create short-term confusion, but long-term gains outweigh risks.

 

GST Collections and the Fiscal Angle

 

GST has been a strong performer in India’s tax system. Monthly GST collections often cross ₹1.5 lakh crore, providing a stable revenue stream for both Centre and states.

 

If the government cuts rates significantly, collections may drop temporarily. However, higher demand and consumption could compensate through volume growth. The Council must strike this balance carefully.

 

International Comparisons

 

Looking at global practices:

 

Singapore: Single GST rate of 9% (simple and effective).

 

Malaysia: Initially implemented multi-slab GST, later shifted to a simpler model.

 

European Union: Multiple VAT rates but countries often consolidate for efficiency.

 

India’s move towards a two-slab GST would bring it closer to global best practices while considering its unique economy.

 

FAQs on GST Rate Cuts

 Q1. What is the likely new GST structure?

A two-slab system: one lower slab (~8-10%) and one higher slab (~16-18%), with luxury goods at 28% plus cess.

 

Q2. When will the new GST rates be announced?

The GST Council meeting on September 3-4 is expected to finalize discussions. Announcements may follow soon after.

 

Q3. Which goods may become cheaper?

Daily-use essentials, packaged foods, household appliances, and possibly insurance premiums.

 

Q4. Will automobiles get relief?

There is strong demand from the auto industry, but a final decision will depend on state consensus.

 

Q5. How will this impact government revenue?

Short-term collections may dip, but higher demand and compliance could balance it out in the long run.

Conclusion

The upcoming GST Council meeting on September 3-4, 2025, is set to be a landmark session in India’s taxation journey. With discussions around rate cuts and a two-slab GST structure, the decisions taken could impact millions of businesses and consumers.

 While challenges remain—especially balancing revenue needs with affordability—the overall move is seen as a positive step towards simplification and growth. If implemented well, the new structure could boost demand, reduce disputes, and make India’s tax system globally competitive.

As the country waits for the Council’s verdict, one thing is clear: GST reform is closer than ever, and it has the potential to reshape India’s economic landscape.