GST revamp: From ACs to snacks, here’s what will get cheaper this Diwali - Economy News

According to the Centre's proposal, 99% products of 12% slab are proposed to move in 5% slab and 90% of items in 28% slab are proposed to move in the 18% slab.

Written by FE Business

Updated: August 15, 2025 20:21 IST

GST Council, Groups of Ministers, GST, rate rationalisation, life & health insurance, compensation cess, GST exemption, finance ministry, central government, tax collection

GST Council has set up three key Groups of Ministers to deliberate major reforms on GST rate rationalisation, life & health insurance and the compensation cess. Image: PTI

Prime Minister Narendra Modi on Friday announced a big change in the present Goods and Service Tax (GST) regime this Diwali. Calling it a “Diwali gift” for the people of India, he said the changes would lessen the burden on the common man. Now, reports say the Centre has proposed to cut down the GST slabs from four to only two (standard and merit), and mulling to bring most of the items under the 12% bracket to 5% and those taxed at 28% will most likely be put under the 18% bracket.

A special tax rate of 40% would be put in place for products like tobacco, alcohol, pan masala and online betting among others, reported news agency PTI.

It cited government sources and said that 99% products of 12% slab are proposed to move in 5% slab and 90% of items in 28% slab are proposed to move in the 18% slab.

What is the status of the proposed new GST regime?

The PM said the changes will be there by Diwali, and hence it is being ascertained that the government has already begun the process to finalise the changes. The sources, as per PTI, said that the proposal by the Centre has been sent to the states. It has also been sent to the Group of Ministers (GoM) of the GST Council.

Now the GoM will study the proposal and a meeting of the GST Council is likely to be held in September-October to consider the proposal.

“This Diwali, I am going to make it a double Diwali for you. This Diwali, you fellow countrymen are going to get a very big gift. In the last 8 years, we have done a big reform of GST, reduced the tax burden across the country, simplified the tax regime and after 8 years, the need of the hour is that we should review it once. We started the review by setting up a high-power committee and also held discussions with the states,” PM Modi said in his Independence Day address to the nation.

“We are coming with the next generation of GST reforms, this will be a gift for you this Diwali, taxes needed by the common man will be reduced substantially, a lot of facilities will be increased. Our MSMEs, our small entrepreneurs, will get a huge benefit. Everyday items will become very cheap and that will also give a new boost to the economy,” he added.

What will become cheaper under revamped GST rates?

The government at present earns the highest tax collection, 65%, from the 18% levy. The 28% tax bracket provides 11% of total revenue while 12% slab accounts for just 5% of the revenue. The lowest tax slab of 5% on essential daily-use items contributes 7% of the Centre’s total GST earnings.