Mumbai: India is set to witness one of the biggest changes in its Goods and Services Tax (GST) system since its launch in 2017. Prime Minister Narendra Modi, in his Independence Day speech last week, called it a “next-generation” reform that will simplify taxes and reduce costs for common people.
Currently, GST has four main slabs — 5 percent, 12 percent, 18 percent and 28 percent. The government now plans to reduce this to just two slabs: 5 percent and 18 percent.
- Goods under the 28 percent bracket will mostly move to 18 percent
- Items at 12 percent will likely move to 5 percent
- Daily-use essentials will remain at zero percent GST
In addition, a special sin tax of 40 percent will continue on harmful items such as tobacco and cigarettes.
What Will Become Cheaper?
The detailed list is yet to be announced, but sources suggest many daily-use products and common household items could see lower taxes. These may include:
-Toothpaste, hair oil, umbrellas
-Pressure cookers, sewing machines, small washing machines
-Bicycles, footwear (Rs 500–1,000), readymade clothes (above Rs 1,000)
-Processed food, mobile phones, laptops, stationery items
-Vaccines, ceramic tiles, agricultural tools
Essential items like fruits, vegetables, milk, grains, and education will remain tax-free.
Higher-End Goods in 18 percent Slab
Products like televisions, refrigerators, air conditioners, washing machines, and aerated drinks are expected to fall under the 18% GST bracket. Even construction goods such as cement and ready-mix concrete may be taxed at this rate.
Cars and Bikes May Get Cheaper
At present, cars and two-wheelers are taxed at 28 percent GST. Cars also carry an additional compensation cess of up to 22 percent, depending on engine size and type. Two-wheelers above 350cc pay a 3 percent cess.
With the 28% bracket being scrapped, cars and bikes are likely to move to the 18% slab. This could make vehicles at least 10 percent cheaper, sparking strong demand. Electric cars will remain at 5 percent GST without cess.
On Monday, auto shares surged, with the Nifty Auto index rising 4.6 percent on these expectations.
Markets Cheer S&P Rating Upgrade
Adding to the positive mood, S&P Global Ratings upgraded India’s credit rating to BBB from BBB- after almost 20 years, with a stable outlook.
This upgrade boosts investor confidence, strengthens India’s image in global markets, and completely dismisses earlier criticisms — including former US President Donald Trump’s remark calling India a “dead economy.”
