GST Council Meets Today: Major Tax Cuts, New Luxury Levy on Agenda in Sweeping Overhaul

The Goods and Services Tax (GST) Council is set for a pivotal two-day meeting starting today, with a landmark overhaul on the agenda that could see tax cuts on a wide range of everyday essentials and electronic goods, while introducing a new, higher levy on luxury items and ‘sin’ goods . Described as a “next-gen” GST reform, the Centre’s proposal aims to simplify the current multi-tiered structure by pruning it down to just two slabs: 5% and 18%, effectively doing away with the 12% and 28% brackets . This move, if approved, would mark one of the most significant changes to India’s indirect tax system since its launch in July 2017 .

Under the proposed plan, most goods currently taxed at 12% and 28% would shift to lower rates, promising a price drop for many consumer products . Staples like ghee, nuts, and packaged drinking water, along with common household items such as umbrellas and hairpins, are expected to move from the 12% slab to the 5% slab . Electronic appliances like televisions, washing machines, and refrigerators, which are currently in the 28% bracket, could become more affordable as they are slated to move to the 18% slab .

While most items are set for a tax reduction, the government plans to introduce a special 40% slab for luxury and demerit goods . High-end automobiles, tobacco products, and pan masala, which currently attract a 28% GST plus a compensation cess, are likely to be moved into this new, higher tax category . The proposal also includes a push to apply a 5% GST on electric vehicles to encourage adoption, though discussions are ongoing about whether premium EVs should face higher taxes .

The proposed overhaul, however, has raised concerns among several opposition-ruled states, including West Bengal, Kerala, and Tamil Nadu, who fear a significant dent in their revenues . These states are expected to demand a clear compensation mechanism, especially since the original five-year compensation period guaranteed by the Centre expired in June 2022 .

The reform follows Prime Minister Narendra Modi’s Independence Day promise of major tax changes aimed at boosting consumption and simplifying the GST regime . With the Group of Ministers (GoM) having already endorsed the plan in principle, the GST Council’s meeting on September 3 and 4 will be crucial in shaping the final outcome