GST Revamp On Track: GoM Backs Centre’s Two-Slab Plan, Scraps 12% & 28% Rates

GST Revamp On Track: The group of ministers (GoM) for GST reforms has accepted the proposal for two GST slabs and recommended scrapping of 12% and 28% tax rates. The six-member GoM, headed by Bihar Deputy Chief Minister Samrat Choudhary, has agreed to replace the current four-rate structure of 5, 12, 18 and 28% with two rates.

The new rate slabs will be 5% for merit goods and services and 18% for standard items. A higher 40% rate will remain on a small list of sin goods. "Both the proposals of the Centre have been accepted by the GoM on the tax rate rationalisation," Choudhary said after the GoM meeting.

The GST panel has recommended rate rationalisation and the GoM will present the final report to the GST Council. The GST Council is expected to meet on Sept 18-19, 2025 to discuss the changes on tax rates.

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Members of the GoM include Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda and Kerala Finance Minister K N Balagopal.

Finance Minister Nirmala Sitharaman had told the GoM earlier, “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.”

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99% of items in 12% bracket will be reclassified to 5% and 90% of goods and services in 28% rate will shift to 18%. Centre has argued that this will make GST simpler and broaden compliance.

The GoM also discussed the Centre’s proposal to exempt GST on health and life insurance for individuals which will have a revenue impact of around ₹9,700 crore annually. Most states supported the proposal but wanted a mechanism to ensure that insurers pass on the benefit to policyholders.

GST Council will take up the recommendations in its next meeting for approval.

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