GST, or Goods and Services Tax, is getting a major overhaul in India. The government plans to roll out a new, simplified tax structure by Diwali 2025, which will change what you pay for many everyday items. The goal is to make things cheaper for the common person, boost the economy, and make the tax system easier to understand.
What’s Changing?
The current four-slab system (5%, 12%, 18%, and 28%) is likely to be replaced by a simpler two-slab structure. Here’s a breakdown of the key changes:
- Goodbye, 12% and 28% Slabs: The 12% slab is expected to be eliminated, with most items in it moving to the lower 5% slab. The 28% slab will also be largely dismantled, with many products shifting to the 18% bracket.
- Two Main Slabs: The new system will primarily have two rates:
- 5%: For essential and daily-use items. This could include items from the current 12% slab, making them more affordable.
- 18%: For most other goods and services.
- A New 40% Slab for “Sin” Goods: A special, higher tax of 40% is proposed for luxury and “sin” goods like tobacco and pan masala. Online gaming is also expected to be in this category.
What Will Get Cheaper or More Expensive?
This revamp could bring significant changes to your household budget.
Likely to Get Cheaper:
- Electronics: Big-ticket items like ACs, TVs, refrigerators, and washing machines are expected to move from the current 28% slab to the 18% slab, which will lower their prices.
- Cement: A key material for construction, cement is also slated to move from 28% to 18%.
- Daily Essentials: Many small, everyday items currently taxed at 12% could fall into the 5% slab.
- Insurance: There could be a reduction in tax rates for health and life insurance.
Likely to Stay Expensive:
- Tobacco and Pan Masala: These items will face the new 40% tax rate.
- Online Gaming: This will be treated as a “demerit” good and taxed at the highest rate.
What’s Not Clear Yet?
While many details have emerged, some areas are still uncertain. The new GST rate for automobiles is not finalized, and it’s expected that petrol, diesel, and crude oil will remain outside the GST framework for now.
What Else Is Changing?
Beyond the rates, the government is also focused on making the tax system more efficient. This includes:
- Simplified Compliance: Tech-driven, time-bound registration for businesses.
- Easier Filings: Pre-filled returns to reduce manual work and errors.
- Faster Refunds: Automated and quicker refund processes for businesses.
The GST Council is set to meet twice in September to finalize all the changes.