GST Council to Explore Reducing 12% Tax Slab

The GST Council is set to convene in July 2025 to discuss simplifying India’s Goods and Services Tax (GST) structure, with a focus on reducing the number of items in the 12% tax slab. This move aims to streamline the current four-tier tax system, which includes rates of 5%, 12%, 18%, and 28%, alongside special rates like 0.25% for diamonds and 3% for gold and silver.

The council’s agenda includes shifting some goods from the 12% slab to either the 5% or 18% slabs to create a more straightforward tax framework.

A key discussion point will be the tax treatment of service intermediaries, particularly in sectors like IT, where Indian firms often serve multinational companies abroad. Currently, these services face an 18% GST, and the council may consider exemptions or reduced rates to ease the financial burden on such businesses, potentially saving the sector significant costs. 

Concerns have been raised about the impact of moving items from the 12% to the 5% slab, as manufacturers may lose input tax credit eligibility, increasing production costs. The council’s deliberations aim to balance revenue needs with affordability for consumers, especially for essential goods.

Recent posts on X indicate public interest in these changes, with some users speculating that simplifying the GST structure could affect prices for everyday items, though opinions vary on whether this will benefit or challenge consumers and businesses.

The GST Council, chaired by the Union Finance Minister and comprising state finance ministers, has been working on rate rationalization to make the tax system more efficient since its inception in 2016. With monthly GST collections nearing ₹2 lakh crore, reflecting an 11% growth rate, the council’s efforts to refine the tax structure are seen as a step toward sustaining economic growth while addressing compliance and revenue concerns.

Published in SouthAsianDesk, June 26th, 2025

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