Centre considers scrapping 12% GST slab; move could ease burden on middle class and boost consumption despite ₹40,000-₹50,000 crore fiscal impact
July-2, 2025: In a significant move aimed at easing the cost of living for middle and lower-income households, the central government is planning a major overhaul of the Goods and Services Tax (GST) structure. According to government sources, the Centre may eliminate the 12% GST slab altogether or reclassify a wide array of commonly used items into the lower 5% tax bracket.
Also Read: Trump Signals Breakthrough in India Trade Deal with Promise of ‘Much Less Tariffs’
The restructuring is expected to provide direct relief to consumers by reducing prices on a wide range of products, including toothpaste, pressure cookers, electric irons, utensils, geysers, bicycles, readymade garments, and footwear.
🔻 Items Likely to Get Cheaper
Goods that may shift from 12% GST to 5% include:
- Toothpaste and tooth powder
- Umbrellas
- Sewing machines
- Pressure cookers & kitchen utensils
- Electric irons, geysers, and small washing machines
- Bicycles
- Readymade garments priced above ₹1,000
- Footwear priced between ₹500 and ₹1,000
- Stationery items like geometry boxes, exercise books
- Basic glazed ceramic tiles
- Vaccines, diagnostic kits for TB, HIV, Hepatitis
- Solar water heaters and water purifiers
- Ayurvedic and Unani medicines
- Agricultural equipment like threshers
💰 Financial Implications & Government Strategy
The proposed GST changes are estimated to cost the government ₹40,000 to ₹50,000 crore annually. However, the Centre is ready to absorb this short-term loss, betting on increased consumption and a broader tax base to drive long-term gains in GST revenue.
Finance Minister Nirmala Sitharaman, in a recent interview, hinted that the government is actively working on a “more rational GST structure” and evaluating relief for the middle class.
⚖️ Opposition & Next Steps
Despite the Centre’s push, consensus among the states is yet to be achieved. States like Punjab, Kerala, Madhya Pradesh, and West Bengal have raised objections to the proposal. Any change in GST rates requires approval from the GST Council, where all states have equal voting rights.
The matter is likely to be discussed during the 56th GST Council Meeting, expected later this month. As per norms, the Council requires a minimum 15-day notice for such a meeting.
🔍 Background on 12% GST Slab
The 12% slab covers mid-tier goods — neither luxury items (which are taxed at 18% or 28%) nor essentials (usually taxed at 0% or 5%). Most of these products are used by middle and lower-income groups.
By shifting these items into the 5% bracket, the government hopes to stimulate demand, reduce inflationary pressure, and provide tangible financial relief to everyday consumers.
Tags:
GST reform, GST slab cut, middle class relief, cheaper goods India, toothpaste GST, clothes GST, footwear GST, utensils GST, Nirmala Sitharaman, GST Council meeting, economic policy, Modi government, tax policy, GST rate revision