The Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, on Wednesday approved a simplified two-tier rate structure of 5% and 18%, which will be implemented nationwide from September 22. The decision was taken during the marathon 56th GST Council meeting, which lasted 10.5 hours and was marked by intense deliberations between the Centre and states.
Watch Live: Smt @nsitharaman addresses the media on the outcomes of 56th GST Council Meeting in New Delhi. @PIB_India @FinMinIndia @GST_Council https://t.co/saqmJf68Nu
— Nirmala Sitharaman Office (@nsitharamanoffc) September 3, 2025
Bihar Deputy Chief Minister Samrat Choudhary said all states were on board for the rate rationalisation. “It was a consensus-based decision,” he noted.
West Bengal Finance Minister Chandrima Bhattacharya highlighted that the total revenue loss due to the restructuring would amount to ₹47,700 crore. Uttar Pradesh Finance Minister Suresh Khanna added that no decision has yet been taken on the tax incidence for demerit goods, with the possibility of a levy over and above 40% to be decided later.
Essentials To Get Cheaper, Luxury Goods Face Higher Slab
The new framework replaces the existing four-tier system, scrapping the 12% and 28% brackets introduced in 2017. More than 99% of goods currently under the 12% slab will shift to 5%. This includes daily staples such as ghee, nuts, packaged drinking water (20-litre cans), non-aerated beverages, namkeen, medicines, and medical devices. Common household items like pencils, bicycles, umbrellas, and hairpins will also benefit from the reduced rate.
Electronic appliances such as televisions, washing machines, and refrigerators, which currently attract 28% GST, are expected to move to the 18% bracket, potentially reducing consumer costs.
The Centre has also proposed a new 40% GST slab for luxury and sin goods. High-end automobiles, SUVs, and premium vehicles are likely to fall under this category, along with tobacco products, pan masala, and cigarettes. Discussions are ongoing regarding additional levies.
Electric vehicles (EVs) remain a focus area, with the government aiming to keep them at 5% GST to encourage adoption. However, debate continues on whether premium EVs should face higher rates to distinguish them from affordable models.
Opposition States Flag Revenue Concerns
Several opposition-ruled states, including West Bengal, Kerala, Tamil Nadu, Punjab, Telangana, Karnataka, Himachal Pradesh, and Jharkhand, raised concerns over potential revenue shortfalls. They emphasised the need for a clear compensation mechanism, particularly after the expiry of the earlier compensation cess system in June 2022.
The reform follows Prime Minister Narendra Modi’s Independence Day pledge to simplify India’s indirect tax structure and boost consumption. If successfully rolled out, the new two-tier GST will mark one of the most significant overhauls since the tax was first introduced in 2017.
