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GST Council Approves Major Tax Reform: Two Slabs of 5% & 18% to Replace 12% & 28%

  • By Thetripurapost Desk, New Delhi
  • Sep 03, 2025
  • 557

In a landmark decision, the 56th meeting of the GST Council has approved a major reform in the tax structure by removing the 12% and 28% slabs and bringing in a simplified two-tier system of 5% and 18% GST, effective from September 22. The announcement was confirmed by Bihar Finance Minister Samrat Chaudhary after the meeting.

The two-day meeting, chaired by Union Finance Minister Nirmala Sitharaman, will conclude on September 4. Following this, the Centre is expected to officially announce all the decisions taken.

Key Highlights of the Meeting

Clothes and Footwear to Get Cheaper: GST on shoes and clothes priced up to ₹2,500 may be reduced to 5%, lowering costs for consumers.

Faster GST Registration: Time for registration of MSMEs and startups cut from 30 days to just 3 days.

Automatic Refunds for Exporters: Exporters to receive automatic GST refunds, easing their compliance burden.

Health Insurance & Medicines Relief: Premiums on health insurance and GST on life-saving drugs will be reduced.

Simplified Compliance: An automatic return filing system proposed to ease GST compliance.

Luxury EVs to Cost More: GST on electric vehicles priced above ₹20 lakh may rise from 5% to 18%, impacting premium carmakers.

States Raise Concerns

Opposition-ruled states have insisted that the benefit of GST cuts should directly reach consumers and not be pocketed by companies. They have also demanded a new compensation scheme to offset revenue losses, reminding the Centre of its 2017 promise of five years’ compensation, which ended in June 2022.

Some BJP-ruled states too have expressed concerns about the possible revenue shortfall. Several states want a share of the 40% luxury tax proceeds to strengthen their finances.

175 Items May See Rate Cuts

According to sources, GST may be reduced on around 175 items, including:

From 12% to 5%: Dry fruits, toothpaste, soap, hair oil, branded snacks, common medicines, frozen vegetables, sewing machines, bicycles, utensils, geysers, clothes above ₹1,000, and shoes between ₹500–1,000.

From 28% to 18%: Cement, chocolates, beauty products, refrigerators, ACs, washing machines, dishwashers, rubber tyres, aluminium foil, printers, razors, and protein supplements.


This move is expected to reduce average GST rates below 10% (from the current 11.5%) and give a boost to consumer demand, especially during the Navratri and festive season.

PM Modi’s Festive Promise

Prime Minister Narendra Modi had hinted at these reforms in his Independence Day speech, promising a “big Diwali gift” in the form of next-generation GST reforms aimed at lowering taxes and making essential goods more affordable.

What Lies Ahead

If implemented, this reform will mark the biggest restructuring of GST since its launch in 2017. While consumers can look forward to cheaper goods and services, states’ concerns on revenue loss will need careful handling to ensure the smooth rollout of the new tax structure.