Under GST reform, the GoM has accepted the proposal to eliminate 12% and 28% slabs and include 5% and 18% slabs. Now when will this be implemented and what will be the further process?
The Group of Ministers (GoM) on rationalizing the Goods and Services Tax (GST) rate has accepted the Centre’s proposal to abolish the 12 percent and 28 percent slabs. After abolishing these, it was proposed to put the items included in these in the 5 percent and 18 percent slabs. Bihar Deputy Chief Minister Samrat Choudhary told the media on August 21 that the GoM has accepted it.
The recommendations of the GoM will now be discussed in the next meeting of the GST Council. This meeting is likely to be held for two days in September 2025. During this, major changes like abolition of 12% and 28% slabs, rationalization of health and life insurance rates, and adjustment in tax slabs on essential commodities will be considered. The GST Council will approve these recommendations and decide the timeline for implementation.
After this, the central government will work with the finance ministers of the states to build a broad consensus. This process is important for implementing tax reforms, as GST is a shared tax system of the center and the state. After consensus between the states and the center, amendments will be required in the GST law to reduce the slabs. A bill can be introduced in Parliament for this. Also, administrative arrangements, such as tax code and software updates, will also have to be made to implement the new rates.
Prime Minister Narendra Modi has announced the formation of a task force for amendments in GST laws and next generation reforms. This task force will help in implementing the new structure.
How long it will take?
Prime Minister Narendra Modi had announced in his Independence Day speech on August 15, 2025 that GST reforms will be implemented by Diwali 2025. This means that the new two-slab system (5% and 18%) can come into effect by October-November 2025. Let us tell you that along with eliminating the 12% and 28% slabs, the government will impose a special rate of 40 percent on luxury and harmful goods (such as tobacco, online gaming).
This will ensure that there is not much impact on revenue.
The government hopes that reducing the slabs will increase consumption, which will compensate for the revenue. Currently, the 18% slab contributes 65% to GST revenue, while the 28% slab contributes 11% and the 12% slab contributes 5%.
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