The Goods and Services Tax (GST) Council, headed by Finance Minister Nirmala Sitharaman, is meeting today to discuss a major shake-up in India’s tax system. Traders and businesses are expecting a “Diwali gift” in the form of rate cuts and a simplified two-slab GST system.

Prime Minister Narendra Modi earlier said that reforms could bring reductions across multiple categories. The Council, which includes state and Union Territory finance ministers, is considering moving from the current four-slab system, 5%, 12%, 18%, and 28% to a simpler structure.

Under the proposals, items in the 28% bracket could drop to 18%, while some goods currently taxed at 18% may fall to 12% or even 5%. Goods and services may be broadly classified as ‘merit’ or ‘standard’, with lower rates for the latter. A special 40% “sin tax” is expected to continue for tobacco, pan masala, and luxury vehicles.

Sectors that could benefit

  • Automobiles: Small cars (under 1200cc), motorcycles (under 350cc), and auto parts may see GST cut from 28% to 18%.

  • Hospitality & Entertainment: Hotel stays and movie tickets could drop from 12% to 5%.

  • Healthcare: Cancer drugs may be exempt; other medicines and essential medical supplies may move from 12% to 5%. Health and life insurance could also be exempt.

  • Daily-Use Goods: Items like paneer, fruit juices, butter, ice cream, pizza bread, and khakra may become cheaper.

  • Agriculture & Fertilisers: Sulphuric acid, nitric acid, and ammonia may fall from 18% to 5%.

  • Textiles: Synthetic yarns, carpets, and handicrafts may shift from 12% to 5%.

  • Solar Cookers: Expected to see a cut from 12% to 5%.

  • Stationery & Toiletries: Erasers may be exempted; notebooks, maps, charts, toothpaste, soap, shampoo, and oil may move to the 5% slab.

  • Umbrellas & Hotel Rooms: GST may drop to 5%, including hotels with rent up to Rs 7,500.

Who could be affected

  • Luxury & Sin Goods: Luxury cars and premium EVs, tobacco, and pan masala may face a 40% GST.

  • Electric Vehicles (EVs): Mid-range EVs (Rs 20-40 lakh) could see GST rise from 5% to 18%, while luxury EVs (above Rs 40 lakh) may fall under the 40% bracket.

  • Coal & Energy Products: GST on coal may rise from 5% to 18%, potentially impacting electricity tariffs.

  • Apparel: Clothing above Rs 2,500 per piece could move from 12% to 18%.

Experts believe these changes could boost domestic consumption, especially among middle-class households, and encourage private investment. The government hopes the reforms will increase market activity, despite an estimated revenue loss of Rs 50,000 crore. Sources told NDTV that the new GST rates could take effect from September 22.