GNew GST Rules: Big Changes Coming to the GST System, What Awaits the Common Person?

WBPAY4 hours agoLast Updated: August 16, 2025

New GST Rules: Prime Minister Narendra Modi has indicated a major change in India’s Goods and Services Tax (GST) system, which could come as a “Double Diwali” gift for the general public. This new proposal talks about simplifying the system by reducing the multiple GST slabs, which could lower the prices of many essential items.

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Current GST Structure

Currently, India primarily has five GST slabs:

0%: For essential items like food grains, fresh fruits, and vegetables.
5%: For items like edible oil and footwear under ₹1000.
12%: For processed foods, mobile phones, and fruit juices.
18%: For items like soap and toothpaste.
28%: For luxury goods, cars, and tobacco products, on which an additional cess is also imposed.

Proposed New GST Structure

The new proposal considers bringing GST primarily into two slabs – 5% and 18%. As a result, the 12% slab might be eliminated. About 99% of the goods currently in the 12% slab could be moved to the 5% slab, and the rest to the 18% slab. Similarly, many items from the 28% slab could be moved to the 18% slab, making 18% the standard rate.

Additionally, a special 40% slab might be introduced for “de-merit” goods like tobacco products and polluting SUVs. However, petroleum products and alcohol will likely remain outside the GST ambit, as they are a major source of revenue for state governments.

Why this Reform?

There are several reasons behind this reform:

Simplicity: To reduce the confusion among consumers and simplify the tax compliance process for businesses.
Solving the Inverted Duty Structure: To resolve issues where the GST on inputs is higher than on the final product, causing blocked funds for businesses.
Boosting Consumption: Lower taxes will leave more disposable income in the hands of the people, which will increase demand in the market and benefit the economy.
End of Compensation Cess: The compensation cess paid to states is set to end on March 31, 2026, which will mark the beginning of a new phase for GST.

When could it be implemented?

As indicated by Prime Minister Modi, these changes could be implemented around Diwali 2025. A Group of Ministers led by Bihar’s Deputy Chief Minister Samrat Chaudhary will submit the final proposal, and a decision on this matter could be taken at the GST Council meeting in September.