Mumbai, July 2: In a move aimed at providing significant economic relief to India’s middle and lower-income households, the central government is reportedly considering a major overhaul of the Goods and Services Tax (GST) framework. The proposed restructuring is estimated to cost the government between INR 40,000 crore and INR 50,000 crore in the short term. However, officials argue that lower prices on essential and semi-essential items will stimulate consumption.

Sources cited by NDTV indicate that the Centre is planning to eliminate the 12% GST slab entirely, potentially shifting several commonly used household items to the lower 5% tax bracket. Finance Minister Nirmala Sitharaman, in a recent interview, signalled the government’s intent to rationalise GST rates and extend relief to the middle class. This follows Budget 2025's major tax relief move, which exempted annual incomes up to INR 12 lakh under the new tax regime. GST on UPI Payments? Here’s All You Need To Know About the Proposed Digital Payment Tax.

List of Items That May Get Cheaper

Items under review for tax reduction include widely used products such as toothpaste, tooth powder, umbrellas, bicycles, readymade garments priced over INR 1,000, and footwear in the INR 500-INR 1,000 range. Household necessities like pressure cookers, kitchen utensils, geysers, electric irons, sewing machines, and small washing machines are also likely to be moved to the 5% slab.

School stationery, including geometry boxes, exercise books, drawing materials, and diagnostic kits for diseases like HIV and tuberculosis, may also benefit from reduced taxation. Other items in consideration include agricultural tools like threshers, solar water heaters, basic ceramic tiles, prefabricated structures, and certain vaccines. GST Council Proposes Waiving of Interest, Penalty on Demand Notices Issued to Taxpayers Under Section 73, if Tax Paid by March 31, 2025.

Despite the Centre’s push, changes to GST rates cannot be implemented unilaterally. The GST Council, a body comprising representatives from the Centre and all states, must approve any modifications. So far, states such as Kerala, Punjab, Madhya Pradesh, and West Bengal have expressed reservations.

Historically, the Council has operated by consensus, with voting held only once since GST’s rollout in 2017. The proposed slab restructuring is expected to be a major agenda item at the upcoming 56th GST Council meeting, likely to be held later this month. A minimum 15-day notice is required to convene the meeting.

India currently operates a four-tier GST system - 5%, 12%, 18%, and 28%. The 12% slab covers 19% of taxable items, many of which are everyday products used by middle-income families. Removing this tier could simplify GST compliance and reduce household expenses.

The government’s confidence in absorbing the fiscal impact is backed by record GST collections. Gross GST revenue for FY2024-25 surged to INR 22.08 lakh crore, a 9.4% year-on-year increase. Monthly average collections now stand at INR 1.84 lakh crore, up from INR 1.68 lakh crore in FY24. The taxpayer base has more than doubled since 2017, growing from 65 lakh to over 1.51 crore.

If implemented, the move could significantly reduce the cost of living for millions, simplify India’s tax structure, and inject new momentum into consumption-led growth. However, building consensus among the states remains the biggest hurdle before these changes can become reality.

(The above story first appeared on LatestLY on Jul 02, 2025 03:42 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).