GST Reforms 2025: Big Relief for Middle Class, Electronics, and Essentials

GST Tax Slab: Prime Minister Narendra Modi has talked about the new reforms in the Goods and Services Tax (GST) in his Independence Day speech from the Red Fort. He announced that these new reforms can be implemented this Diwali. Currently, a total of four GST slabs are in force - 5%, 12%, 18% and 24%. The government has indicated that it will simplify the tax slabs and reduce the burden on the pockets of the people by making goods and services cheaper.

If this amendment is approved, this will be the biggest change since the implementation of GST in 2017.

According to a media report, the new GST proposal has suggested keeping most items under two main slabs - 5% and 18%. However, there is a suggestion to impose a tax as high as 40% on items like tobacco and online gaming.

If the proposal is approved, it will be the biggest change since the GST was introduced in 2017. The aim of the amendment is to simplify the GST rules, reduce costs for households and traders and remove loopholes in the current system.

The Finance Ministry said in a statement, "Regulating tax rates will reduce the burden on households and help farmers, women, students and the middle class, which has been considered a top priority."

Major changes in GST rates

According to the new proposal, most of the items that currently attract 12% GST will be reduced to 5% slab. Similarly, it is suggested that products that currently attract 28% GST will be brought to 18% slab. This will directly benefit items like TVs, ACs, refrigerators and washing machines, as the tax on them will be reduced from 28% to 18%. This will greatly benefit the middle class.

Relief on essential items

Food, medicines, education and basic necessities are proposed to be exempted from tax or to levy only 5% GST. In the agriculture sector, GST on equipment like sprinklers and agricultural machinery may be reduced from 12% to 5%.

Insurance services may also see a steep reduction of 18% to 5% or even zero. While lower rates are expected to be applied to medical products and medicines to make healthcare more affordable. In addition, a tax of up to 40% may be applied to tobacco products and online gaming.

Which items will be exempted from GST?

Petroleum products will remain outside the GST system as at present. Diamonds (0.25%) and metals like gold or silver will continue to attract 3% tax. In addition, reforms have also been proposed for textiles and fertilizers.

The next step of the central government

The central government has sent proposals on rationalizing GST rates, compensation and insurance to three Groups of Ministers (GOMs). After their review, these recommendations will be sent to the GST Council. The GST Council has the power to approve, modify or reject the scheme. Based on the deliberations, the Council may consider the matter in September or early October.