New Delhi, Sept 2025 – In a significant move aimed at simplifying India’s indirect tax regime, the GST Council has approved a 2-slab structure for Goods and Services Tax (GST). The decision, taken after months of deliberation, is expected to streamline compliance, reduce confusion for businesses, and bring relief to consumers in some sectors — while making certain goods and services costlier.
What is the New GST Structure?
The Council has replaced the existing 4-slab GST structure (5%, 12%, 18%, and 28%) with a simpler 2-slab system. Now, most goods and services will fall under either the 12% slab or the 18% slab, while a few essential items will continue to enjoy exemptions.
Finance Ministry officials said the new structure was designed to balance government revenue needs with consumer affordability.
What Gets Cheaper?
Under the revised tax system, several daily-use and essential goods have shifted to the lower 12% slab, which means consumers will soon notice a price drop.
- Packaged food items
- Household essentials such as detergents and soaps
- Educational services and select health-related services
- Some categories of clothing and footwear
This reduction is expected to benefit middle-class households and increase consumption in the retail market.
What Gets Costlier?
On the other hand, certain products and services that were earlier taxed at 12% have now been moved to the 18% slab, making them more expensive.
- Smartphones and select electronic gadgets
- Air travel (economy class)
- Dining in mid-range restaurants
- Lifestyle goods such as branded apparel and accessories
This adjustment is likely aimed at generating higher revenue from non-essential and luxury categories.
Why This Change Matters
The move towards a 2-slab structure addresses one of the long-standing criticisms of the GST system – its complexity. By reducing the number of tax brackets, the government hopes to:
- Simplify compliance for small and medium businesses
- Improve transparency in billing
- Reduce classification disputes
- Boost tax collection efficiency
Reactions from Industry and Consumers
Industry experts have welcomed the reform, saying it will make GST filing easier for businesses. However, concerns remain that shifting popular categories like electronics and dining into the higher slab may hurt demand in the short term.
Consumers, on the other hand, are cautiously optimistic. While essential items are set to get cheaper, the increased cost of discretionary spending could impact monthly budgets.
Looking Ahead
The government has stated that the new GST rates will be implemented from October 1, 2025, giving businesses a short window to adjust their pricing and systems.
Economists believe this step is a major milestone in India’s GST journey, moving closer to the vision of “One Nation, One Tax” while ensuring fiscal stability.
