The government has decided to make big changes to the Goods and Services Tax (GST) system. Instead of the old four slabs – 5%, 12%, 18%, and 28% – India will now have only two main slabs: 5% and 18%. In addition, there will be a special 40% tax rate for luxury and “sin” goods like tobacco and high-end cars.
Why the Change?
The GST Council and the Group of Ministers want to make GST simpler and easier to understand. Many people and businesses found the earlier four-slab system confusing. By reducing the number of slabs, the government hopes to make tax collection smoother and encourage more people to follow the rules.
New Slab Structure
- 5% GST: For essential and common-use items like garments, household goods, and many basic products.
- 18% GST: For most other goods and services, including electronics, packaged food, and dining out.
- 40% GST (Special Rate): For luxury cars, tobacco, and other sin goods.
When Will This Start?
The GST Council is expected to meet on September 3-4 to finalize the rollout. If approved, the new rates could start from September 22, just before the festive season.
How It Affects You
- Cars may become cheaper: Small and mid-size cars that earlier had 28% GST may now fall under 18%. Prices could drop by thousands of rupees.
- Insurance premiums could go down: GST on insurance may be cut from 18% to 5%, making policies more affordable.
- Luxury goods will cost more: If you buy high-end cars, tobacco, or similar products, you may pay a higher 40% GST.
Reactions From States and Industry
Some states, like Karnataka, are worried they will lose revenue – possibly around ₹15,000 crore – and are asking the Centre for compensation.
Meanwhile, industries in places like Ludhiana are welcoming the change. They say lower and simpler rates will help boost demand, especially in garments and textiles.
What This Means for the Economy
Experts believe this step will make GST easier to understand, improve compliance, and increase consumption. It could also help India’s economy grow faster, as people may spend more when goods and services become cheaper.
In summary: India’s GST is moving from four rates to a simpler two-slab system, with one extra rate for luxury and sin goods. The change aims to benefit common consumers, reduce confusion, and give the economy a festive boost.
