In a significant step aimed at providing relief to India’s middle and lower-income households, the Centre is considering a major restructuring of the Goods and Services Tax (GST) regime. According to government sources, the plan includes a proposal to eliminate the 12 per cent GST slab entirely or move several commonly used items currently taxed at that rate into the 5 per cent slab.
This initiative comes just months after the Union government announced a series of income tax concessions. If implemented, the latest move could lead to substantial price reductions on a wide array of daily-use goods—ranging from kitchen appliances and bicycles to garments and school supplies—bringing much-needed financial relief to millions.
Key Items That May Get Cheaper
The restructuring targets everyday items used by middle-class and economically weaker households. Sources indicate that the following goods, currently under the 12 per cent GST bracket, could either see a rate reduction or be reclassified under the 5 per cent slab:
- Toothpaste and tooth powder
- Umbrellas
- Sewing machines
- Pressure cookers and steel/aluminium utensils
- Electric irons and water heaters (geysers)
- Small-capacity washing machines
- Bicycles and carriages for disabled persons
- Readymade garments priced above ₹1,000
- Footwear priced between ₹500 and ₹1,000
- Stationery items like geometry boxes, colouring books, and maps
- Most vaccines and diagnostic kits for diseases like HIV and TB
- Solar water heaters
- Glazed ceramic tiles (non-luxury)
- Agricultural equipment including mechanical threshers
- Packaged foods like condensed milk and frozen vegetables
Should these proposals be approved, consumers could expect lower bills on a wide range of essential and semi-essential goods.
Why This Matters: The Economic Angle
While the estimated revenue loss from such a tax cut is expected to be around ₹40,000 crore to ₹50,000 crore annually, the Centre appears prepared to absorb this initial shortfall. The rationale is clear: lower taxes will likely boost consumption, driving up overall demand and eventually expanding the tax base.
Finance Minister Nirmala Sitharaman recently hinted at this strategic shift. In an interview, she mentioned the government was actively working towards a more rational tax structure and is prioritizing relief for the middle class.
“This is not just about tax relief,” said a senior government official. “It’s a calibrated move to stimulate demand in a sluggish market while easing daily life for the average Indian family.”
States Push Back: Opposition From Key Players
Despite the Centre’s intent, implementation will not be easy. Under the GST framework, tax rate changes must be approved by the GST Council, which includes representatives from all states. Several opposition-led states, including Punjab, Kerala, Madhya Pradesh, and West Bengal, have reportedly expressed reservations about the proposed changes.
In the Council’s history, only one decision has been made through voting; all others were settled by consensus. This reflects the political sensitivity and federal complexity involved in altering GST structures.
Sources confirm that the issue will likely be tabled in the upcoming 56th GST Council meeting, which is expected to take place later this month. As per regulations, the meeting can only be convened with at least 15 days’ notice.
A Step Toward GST Simplification
Apart from lowering tax rates, the Centre is also aiming for a simplified GST structure that is easier for small businesses and manufacturers to comply with. Over the years, there have been growing demands to collapse the current multi-slab system into fewer categories to reduce complexity and reduce the scope for disputes.
Currently, India’s GST system has five primary slabs—0%, 5%, 12%, 18%, and 28%. The 12 per cent slab, in particular, has long been seen as a “grey zone”—housing products that are neither essentials nor luxuries. Streamlining this could lead to better clarity and more efficient tax collection.
What Happens Next?
Much depends on the outcome of the upcoming GST Council meeting. If consensus is achieved, the changes could come into effect within a few months, just ahead of the festive season—a time when household consumption typically surges.
For now, middle and lower-income households have reason to hope that the government’s push to reduce GST rates will translate into tangible savings in their daily expenses.
The Centre’s latest move signals a strategic shift in tax policy—one that blends short-term revenue loss with long-term economic gain. By focusing on essential and widely consumed items, the government hopes to not only ease inflationary pressures but also revive consumer sentiment.
Whether this proposal sails smoothly through the political process remains to be seen, but if it does, millions of Indian families stand to benefit from lighter bills and heavier wallets.
