India’s GST is getting a haircut. The Group of Ministers has backed a Centre plan to collapse the messy multi-slab system into two main rates , 5% and 18%,  with a high special levy for a few “sin/luxury” items. Translation: fewer rules, faster arguments about who benefits. 

From Tax Jungle to Two Slabs: What the proposal actually says

A GoM (Group of Ministers) meeting has accepted the Centre’s plan to scrap the 12% and 28% slabs and move most items into 5% or 18%, while keeping a higher ~40% levy for tobacco, luxury items and some high-end cars. The GST Council will take the final call, but the roadmap is clear: simplify, consolidate, and hope states don’t riot. 

Who Gains and Who Pays More? (Spoiler: Your Wallet Will be Confused)

According to reporting on the plan, almost 99% of goods in the 12% bracket could shift to 5%, while around 90% of items in 28% may move to 18%  meaning a lot of everyday stuff could get cheaper, and many “luxury-ish” things would become noticeably cheaper too (unless they’re shoved into the 40% bracket). That’s a big redistribution of tax incidence. 

Practical examples: small tiles, many packaged foods and footwear that were 12% may fall to 5% (cheaper), while some premium consumer goods that were taxed at 28% may move to 18% (cheaper)  but sin goods and certain luxury cars could face the new 40% top levy (still pricey). 

The EV surprise: Good for Green? Maybe Not

Here’s a nuance worth bookmarking: while EVs continue to enjoy favourable tax treatment (some EV items may stay at 5%), moving small ICE (internal combustion engine) cars into the 18% bracket from 28% could narrow the price gap between cheap petrol cars and electric options potentially reducing the incentive to buy EVs. That’s an awkward side-effect if the government actually wants cleaner transport. 

States vs Centre: The Revenue Tug-of-War

States are understandably jittery. Less complicated slabs = easier compliance, but possible revenue loss. Several state finance ministers have already flagged concerns and asked for compensation mechanisms; some states are even quantifying potential shortfalls in tens of thousands of crores. Fiscal federalism drama incoming. 

Simpler Taxes, Fewer Lawyers or Just Clever Optics?

The policy pitch is irresistible: simplify GST to reduce classification fights, ease compliance for businesses, and  the marketing line make taxation “transparent.” That's the real value. But simplification also redistributes the tax burden: winners will tweet, losers will protest, and political spin will insist everyone’s smiling. Whether this is a sincere reform or a clever pre-election PR move depends on a later moment of truth: implementation (and how states are compensated). 

Consumer Scoreboard, Quick hits

  • Groceries & essentials: many will likely fall to 5%,  cheaper checkout. 

  • Mid-range consumer goods: likely land at 18%,  mixed effect, many may get cheaper. T

  • Luxury/sin goods: may face a new ~40% levy, still an expensive, politically convenient target.

  • EV vs ICE: some ICE models may become cheaper relative to EVs, which could slow green uptake. 

Think of GST as a closet stuffed with mismatched hangers. The government wants to throw away the odd hangers and leave you two neat racks “basics” and “everything else” plus a locked shelf for designer drama. Sounds tidy. But someone just tossed half the socks into the wrong drawer, and states are asking who pays for the missing laundry detergent.

GST 2.0, Real Reform or The Next episode of “Tax-opoly”?

This is the biggest GST remix since 2017. If implemented carefully, it could reduce tax clutter, cut compliance costs, and make prices easier to read (no more Google-searching “Is lamination taxed at 12% or 18%?”). But it’s also a high-stakes balancing act: who eats the revenue hit, how the 40% “sin” bracket is defined, and whether greener choices survive the shift will decide if this is GST 2.0 or just a clever PR reset. Expect fireworks at the Council meeting, ministers sharpening rhetoric, and inflation-watchers doing math with broken hearts.

If you like simple tax stories with complicated consequences, welcome to the next few months of Indian policy theatre.