The Indian government proposed that the new GST rates should be at 5% and 18%. The centre has outlined tax rates for cigarettes, sin goods, luxury goods, and daily use items, among others, to be considered and approved by the GST Council in its upcoming meeting.
GST reforms: Indian government on Friday, 15 August 2025, proposed that the new GST rates should be at 5% and 18% while also highlighting that the revamped indirect tax regime will attract a 40% tax for cigarettes and other tobacco products, reported the news agency PTI, citing officials aware of the development on Friday, 15 August 2025.
The agency report also mentions that 99% of the items which are currently falling under the 12% tax bracket are proposed to be shifted to the 5% tax slab in the revamped structure.
According to the agency report, nearly 90% of the taxable items which are currently in the highest GST bracket of 28% are proposed to be shifted to the 18% tax slab.
India expects that the GST reforms will give consumption a big boost in the economy, which will in turn offset the revenue loss due to the rate rationalisation, reported the agency citing the people aware of the development.
Mint reported separately that the centre has also proposed to scrap the existing 12% and 28% GST slabs to finalise only two rate structures in the nation's indirect tax regime.
In addition to the 40% GST on tobacco products like cigarettes, sin goods, and luxury goods will also attract a tax rate of 40%, while the GST rates on daily use items are set to be 5%. However, petroleum products will continue to remain outside the upcoming revamped GST regime.
Total incidence of taxation to remain at the current level of 88%, according to the agency report.
India's two GST slab plan
On India's 79th Independence Day, the Ministry of Finance announced that the centre is planning to move towards a 'simple tax' regime by imposing a 'two slabs' indirect tax regime in the nation.
The government proposed reforms that aim to create two GST slabs, named 'standard and merit', along with a special tax rate for some select few items.
"Essentially move towards simple tax with 2 slabs – standard and merit. Special rates only for select few items," said the ministry, in a social media post on X.
So far, the government has sent its recommendations to the Group of Ministers (GoM) appointed by the GST Council. In the next council meeting, the body will discuss and consider implementing the revamped tax regime. They will also try to implement these changes 'early.'
"The Government reaffirms its commitment to evolving the GST into a simple, stable, and transparent tax system," said the finance ministry.