On Wednesday, August 20, 2025, Finance Minister Nirmala Sitharaman is set to address an important meeting with a group of state ministers.
During this meeting, she will advocate for significant reforms to the Goods and Services Tax (GST). These proposed changes aim to lower tax rates, which could subsequently result in reduced prices for commonly used items.
Apart from a 40% special rate on a chosen few items to the GoM on GST rate rationalisation, the Centre has proposed a 2-tier GST structure of 5 and 18%.
A proposal is set to be discussed during a two-day meeting of the state ministerial panel on August 20 and 21 in New Delhi. The proposal involves the elimination of the existing 12% and 28% tax slabs. Sources indicate that this discussion could lead to significant changes in the current tax structure.
The intention is to present the Centre’s perspective on the GST reform proposal. Although the Centre is not a member of the Group of Ministers (GoM), the presence of the Union Finance Minister and her address will provide the GoM with a clearer understanding of the ideas and reasoning behind the Centre’s proposal.
Bihar’s Deputy Chief Minister, Samrat Choudhary, is leading a six-member Group of Ministers (GoM). This committee includes prominent officials from various states: Suresh Kumar Khanna, the Finance Minister of Uttar Pradesh; Gajendra Singh, the Health Minister of Rajasthan; Chandrima Bhattacharya, the Finance Minister of West Bengal; Krishna Byre Gowda, the Revenue Minister of Karnataka; and K N Balagopal, the Finance Minister of Kerala.
The government has put forward a proposal for a two-slab tax structure, comprising rates of 5% and 18%. This classification categorises items into ‘merit’ and ‘standard’ goods. The primary goal of this framework is to alleviate the tax burden on the middle class, micro, small, and medium enterprises (MSMEs), as well as the agricultural sector.
Under the GST law, the highest allowable tax rate is the proposed 40% will be just for about 5-7 items, including demerit goods.
At present, the GST is charged at 5, 12, 18, and 28%. The food and essential items are either at nil or 5%, luxury and demerit goods come within a 28% slab, with a cess imposed on it.
GoM has accepted the proposal of the Centre, it shall be presented before the GST council, chaired by Sitharaman and including finance ministers from all states and UTs, in its meeting, which may be conducted next month.
The Centre has put forward a proposal to adjust the tax structure, which involves reducing the tax rate for a significant portion of goods. Specifically, 99% of the items currently taxed at the 12% slab would move to a lower 5% tax rate. Additionally, 90% of goods and services in the 28% slab would be realigned to a new tax rate of 18%.
