GST rationalisation: GoM backs Centre's proposal to end 12%, 28% tax rates
New Delhi, Aug 21, 2025
The Group of Ministers on Thursday accepted the Central government's plan to replace current GST rates of 12% and 18% for most items with a much-lower 5% and 18% slabs, as well as a steep 40% levy on
The Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation has accepted the Centre’s proposal to scrap the 12 per cent and 28 per cent GST rates and replace them with 5 per cent and 18 per cent, respectively, GoM chairperson Samrat Choudhary said on Thursday.
“Everyone made suggestions on the proposals put forth by the Centre. Some states had observations, and the matter has been referred to the GST Council, which will take the final decision. The proposal to end the 12 per cent and 28 per cent GST slabs was discussed and supported. We have made our recommendations in favour of scrapping these two slabs,” said Choudhary, who also represents Bihar on the GoM in his capacity as deputy chief minister.
States’ views on the proposal
Uttar Pradesh Finance Minister Suresh Kumar Khanna, who is also part of the GoM, noted that the Centre’s proposal includes a 40 per cent tax on ultra-luxury and sin goods. West Bengal Finance Minister Chandrima Bhattacharya said her state had suggested an additional levy on top of the 40 per cent rate to maintain the current tax incidence on such items. She also pointed out that the Centre’s proposal does not specify the revenue loss that may result for both the Union and the states once the new slabs are implemented, she was quoted as saying by PTI.
On Wednesday, Choudhary had said that the Centre has also suggested removing the GST on life and health insurance premiums.
GST rate overhaul
On August 15, Prime Minister Narendra Modi announced the GST revamp, calling it a Diwali gift for the people. Shortly after, the finance ministry proposed a major overhaul of the GST structure, suggesting 5 per cent and 18 per cent rates for most goods, while a special 40 per cent levy would apply to luxury and sin items such as tobacco.
Finance Minister Nirmala Sitharaman said, “The rate rationalisation will provide greater relief to the common man, farmers, the middle class and MSMEs, while ensuring a simplified, transparent and growth-oriented tax regime.”
[The Business Standard]
