The Goods and Services Tax (GST) may soon go through one of its biggest rate rationalisations since its launch. The GST Council, meeting in early September, is expected to discuss sweeping changes that aim to simplify the tax regime and reduce the burden on consumers across multiple sectors.
Big Relief for Consumers and Key Industries
A major proposal on the table is to bring all food items and textile products under the 5% GST slab. If approved, this move will help reduce costs for everyday essentials, giving direct relief to households while also boosting demand for these industries.
Cement, a long-standing demand in the construction and infrastructure sectors, is tipped to get a major tax cut too. The proposal suggests lowering GST on cement from 28% to 18%, which could significantly reduce building costs. However, whether these benefits are passed on to end buyers will likely depend on greater price transparency in an industry often accused of cartelisation.
Even the services sector could see major changes. Mid- and high-end salons, which currently attract 18% GST, may have rates slashed to just 5%. This would reduce costs for customers while encouraging more footfall for businesses.
Perhaps one of the most impactful changes is the government’s plan to eliminate GST on term assurance and individual health insurance premiums. By making these critical financial products more affordable, the government hopes to improve insurance penetration and provide better protection for the general population.
Towards a Simpler GST Structure
All these proposals will be taken up when the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, meets on September 3–4. The Council is reportedly looking to consolidate GST into a two-tier framework: 5% for essential goods and services, 18% for most others, and a separate 40% slab reserved for luxury and so-called “sin goods” like tobacco and high-end cars.
While suggestions have been made by some states to push the ceiling above 40%, the Centre is not in favor. Officials argue that such a move would complicate the system and require significant legal amendments. Under the Centre’s current plan, small cars would be taxed at 18%, while larger vehicles would face 40%, a reduction from the present effective rate of 50% (28% GST plus cess).
If approved, these changes mark a decisive step toward creating a leaner, more consumer-friendly tax regime. By easing costs in essential sectors while keeping higher taxes for luxury and harmful products, the government aims to balance affordability with fiscal responsibility.
