Big GST Shake-Up: Over 400 Everyday Items May Get Cheaper as India Plans Major Tax Rate Cuts

In a move that could bring relief to millions of consumers and businesses, the Indian government is considering a major overhaul of the Goods and Services Tax (GST) structure. Over 400 items, ranging from hair oil to small cars, may soon see a reduction in GST rates, making them more affordable for everyday use.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, is set to decide on this significant tax cut proposal in its latest meeting. The council is discussing a plan to simplify the current four tax slabs into just two—5% and 18%. This means the existing 12% and 28% slabs could be scrapped, with a new 40% slab being considered for luxury items like cigarettes and expensive cars.

Why the Change?
The government’s push for GST rate cuts comes in response to challenges posed by the 50% tariff imposed by the United States, which has impacted exports in sectors like textiles, automobiles, and possibly pharmaceuticals. To counter this, India aims to boost domestic demand by making essential and consumer goods cheaper.

What Will Get Cheaper?
Items such as toothpaste and shampoo, currently taxed at 18%, may soon fall under the 5% category. Small cars, air conditioners, and televisions, which attract 28% GST, could see their rates slashed to 18%. FMCG giants like Hindustan Unilever and Godrej, as well as electronics firms like Samsung, are expected to benefit from increased sales if the cuts go through. Automakers including Maruti, Toyota, and Suzuki are also looking forward to relief.

What Might Get Expensive?
While most daily-use items will get cheaper, some products could become more expensive. Clothing priced above ₹2,500 may see GST rise from 12% to 18%. Premium and business class air travel could also get costlier, with GST potentially jumping from 12% to 18%.

Impact on Revenue
Experts estimate that the GST rate cuts could result in a revenue loss of up to $21 billion, with states bearing a larger share of the loss than the central government. Despite this, the government is prioritizing public relief and boosting consumption.

Focus Areas for GST Reforms
The GST Council is focusing on eight key sectors for tax reforms: textiles, fertilizers, renewable energy, automobiles, handicrafts, agriculture, health, and insurance. The proposed changes are built on three pillars: structural reform, rationalization of rates, and making life easier for taxpayers. One notable proposal is seamless tech-based GST registration for small businesses and startups.

As India prepares for one of the biggest GST reforms since its introduction, consumers and businesses alike are watching closely. Will your daily essentials get cheaper? Stay tuned for updates and share your thoughts on this major tax shake-up!