The GST Council is expected to deliberate on India's next-generation GST reforms, including rationalisation of tax rates, simplification of compliance, and structural corrections, ahead of an October rollout.
Union Finance Minister Nirmala Sitharaman-led GST Council is set to hold a crucial two-day meeting in New Delhi from 3–4 September 2025. The Council is expected to deliberate on India's next-generation GST reforms, including rationalisation of tax rates, simplification of compliance, and structural corrections, ahead of an October rollout. Officials have indicated that the new GST model may feature a two-slab system, with one bracket ranging from 0–5% for essential items and another from 12–18% for the majority of goods, along with a steep 40% "sin tax" on demerit products like tobacco and gutka.
Speaking at the 120th Foundation Day celebrations of City Union Bank, Sitharaman highlighted that the GST reforms aim to make the economy "absolutely open and transparent" while reducing the compliance burden for businesses, particularly small enterprises. She noted that Prime Minister Narendra Modi has set up a Task Force for next-generation reforms, focused on simplifying regulations, lowering costs, and creating an enabling ecosystem for startups, MSMEs, and entrepreneurs.
"The planned roll-out of the next-generation GST reforms, with the Council meeting tomorrow and the day after, will further reduce compliance burdens, making it easier for small businesses to thrive," Sitharaman said. She also emphasized the broader role of banks in advancing India's vision of Viksit Bharat 2047, including expanding credit, supporting infrastructure, and ensuring timely funding for MSMEs and unbanked populations.
Experts are also looking ahead of the GST reforms, noting their potential to simplify the current tax structure. Brijesh Gandhi of NPV & Associates explained that GST 2.0 merges the existing 5%, 12%, 18%, and 28% slabs into a streamlined system: 5% for essentials, 18% for most goods, and 40% on sin or luxury items.
Brijesh Gandhi, Partner, NPV & Associates LLP, said: "India's ambitious GST 2.0 reform simplifies the current tax structure by merging the 5%, 12%, 18%, and 28% slabs into a more streamlined system: 5% for essentials, 18% for most goods, and a steep 40% 'sin tax' on products like tobacco and gutka."
He added: "Items such as toothpaste, umbrellas, sewing machines, and small washing machines now fall under the 5% merit slab. Meanwhile, high-GST items—like electronics, air conditioners, TVs, small cars, and two-wheelers—will move from the 28% slab to 18%, resulting in nearly a 10% drop in tax burden, likely reducing prices ahead of the festive season."
He added that cement may also see a reduction from 28% to 18%, providing relief to the construction sector. Agriculture, textiles, and health and life insurance premiums could benefit from lower input costs and exemptions, potentially boosting production, sales, and household affordability.
The market has responded positively, with expectations of increased consumption, modest inflation relief, and stronger sentiment ahead of the festive season. E-commerce platforms are preparing for higher demand for big-ticket items. While some states have expressed concerns over potential revenue losses, the broader consensus is that GST 2.0, if executed properly, could enhance affordability, consumer confidence, and long-term economic growth. The Central Board of Indirect Taxes and Customs (CBIC) has advised stakeholders to avoid speculation, stressing that all decisions are made jointly by the Centre and States.
Prabhat Ranjan of Nexdigm noted that the 56th GST Council meeting will likely focus on several key areas: rate rationalisation, compliance simplification through pre-filled returns and automated refunds, structural corrections to address inverted duty structures in sectors like textiles, footwear, and electronics, and clarifications on digital invoicing and GST applicability for emerging sectors such as fintech and insurance.
"The meeting is mostly likely to focus on rate rationalisation, compliance simplification, structural corrections, and sector-specific clarifications, including digital invoicing standards and GST applicability for services such as insurance, fintech, and emerging digital platforms," said Ranjan.
He added that while the meeting represents a significant step toward streamlining India's GST framework, expectations should remain guided by official communications rather than assumptions. The Council, functioning as a federal decision-making body, continues to follow a consultative process with both the Centre and States to ensure consensus before implementing policy changes.
Originally published by Business Today.
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