Televisions, air conditioners, refrigerators, and washing machines are set to move from the current 28% slab to 18%, while online gaming and a handful of other sin or demerit goods face a 40% tax, according to government sources.The Centre has proposed replacing the current multi-tier GST system with a simplified two-slab structure of 5% and 18%, alongside the 40% rate for 5–7 select sin goods.Essential items such as food, medicines, education, and daily-use goods are proposed to remain at Nil or 5%. The plan also includes reducing GST on agricultural equipment like sprinklers and farm machinery from 12% to 5%, and cutting insurance services from 18% to either 5% or Nil. Medicines, medical devices, and other healthcare-related goods are also proposed for lower GST rates to boost affordability.
Also Read: GST rate cuts: PM Modi promises a big Diwali gift this Independence DayAccording to government sources, the Centre has sent its detailed proposal to three existing Groups of Ministers (GoMs) — on GST rate rationalisation, compensation, and insurance — for their consideration before it is taken up by the GST Council.Key Highlights of the Centre’s Next-Gen GST ProposalTwo-slab GST rate structure — 5% and 18% — replacing the current multi-tier system.5–7 ‘sin’ or demerit goods (including online gaming) to be taxed at the highest GST rate of 40%, as allowed under current law.Petroleum products to remain outside GST for now.Special rates such as 0.25% on diamonds and 3% on gold and silver to remain unchanged.Essential goods — food, medicines, education, and daily-use items — to be kept at Nil or 5%.Agricultural equipment, like sprinklers and farm machinery to be reduced from 12% to 5%.Aspirational middle-class items — TVs, refrigerators, washing machines — to drop from 28% to 18%.Insurance services to be reduced from 18% to either 5% or Nil.Online gaming to move to 40% GST, categorised as a ‘sin’ activity.Inverted duty structure correction proposed for textiles and fertilisers.Massive slab reductions:99% of items in the 12% slab are expected to move down to 5%.90% of items in the 28% slab are expected to come down to 18%, with only luxury/demerit goods staying higher.Also Read: Simpler two-rate GST could cut disputes, boost demand, say tax expertsClassification issues in sectors such as automotive components and namkeen need to be resolved.Healthcare affordability: reduced GST on medicines and medical devices.Administrative & Compliance Reforms ProposedSeamless GST registration — 95% of applications to be cleared within 3 days through a tech-driven process.Prefilled GST returns to reduce manual errors and mismatches.Automated refunds for exporters and inverted-duty-hit sectors for faster turnaround.Revenue PerspectiveCurrent GST revenue share: 65% from 18% slab, 11% from 28%, 5% from 12%, 7% from 5%.Centre expects any short-term revenue loss to be offset by increased compliance and tax base expansion.Next StepsThe proposal will be reviewed by the three GoMs.Recommendations will then be sent to the GST Council, which can accept, modify, or reject them.Also Read: India outlines 3-pillar plan for GST reforms: Structural, rate rationalisation and ease of livingThe Council may meet in September or October, depending on how quickly the GoMs complete deliberations.If adopted, this will be the biggest GST rate overhaul since 2017, with sweeping benefits for households, farmers, MSMEs, and key industries — all timed ahead of the festive season.
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