Big Shift In GST Structure
GST Overhaul with Two Slabs And 40 Percent Sin Tax: The Centre has unveiled a major proposal to simplify the Goods and Services Tax (GST). The new structure will have just two primary slabs of 5% and 18%, while a steep 40% rate will apply to sin goods like tobacco and pan masala. This overhaul is aimed at making taxation easier for businesses and affordable for consumers.
Static GK fact: GST was introduced in India on 1 July 2017, replacing multiple indirect taxes with one uniform system.
Key Features Of The New Rates
The 5% slab will cover common-use goods, absorbing most items currently taxed at 12%. The 18% slab will cover aspirational products such as TVs and refrigerators, down from 28%. The 40% rate will be reserved for a small list of sin goods, replacing the current compensation cess.
Essential food items will continue to remain tax-free, ensuring relief for low-income households. Middle-class goods will also see price drops due to the shift from 28% to 18%.
Static GK fact: The GST Council is chaired by the Union Finance Minister, with state finance ministers as members.
Economic Implications
Currently, 67% of GST revenue comes from the 18% slab, while the 12% and 5% slabs contribute 5% and 7% respectively. The restructuring could initially reduce collections but is expected to stimulate higher consumption and boost GDP growth in the medium term.
Sectors like agriculture, textiles, fertilisers, and renewable energy are likely to benefit from lower costs and better compliance systems.
Structural And Procedural Reforms
The government plans to correct the inverted duty structure in sectors like textiles and fertilisers, where raw materials are taxed higher than finished goods. The classification of similar products will be streamlined to avoid disputes—for instance, all savouries and namkeens will be grouped under the same slab.
The plan also includes 95% of business registrations within three days, faster refunds, and pre-filled returns to reduce mismatches. Exporters and small businesses will gain from automated refund systems.
Static GK Tip: India’s GST is often called the “Good and Simple Tax”, a phrase popularised by PM Modi.
Political And Policy Context
In his Independence Day 2025 speech, PM Narendra Modi highlighted these GST reforms as part of the government’s next-generation economic measures. The move is expected to help agriculture, automotives, handicrafts, health, and insurance sectors, making GST more common man-friendly.
No amendment to the GST Act will be required; the changes can be implemented through official notifications. The GST Council will discuss the proposal in September–October 2025, with rollout likely by Q3 FY 2025-26.
Static Usthadian Current Affairs Table
GST Overhaul with Two Slabs And 40 Percent Sin Tax:
| Topic | Detail |
| GST launch year | 2017 |
| New GST slabs | 5% and 18% |
| Sin goods tax | 40% |
| Current top contributor | 18% slab gives 67% of revenue |
| Essential food items | Remain tax-free |
| Middle-class aspirational goods | Move from 28% to 18% |
| Target for business registration | 95% within 3 days |
| Refunds | Automated for exporters and inverted duty cases |
| Chairperson of GST Council | Union Finance Minister |
| Expected rollout | Q3 FY 2025-26 |
