Retail inflation was around 4.58% in June 2025. Household budgets remain under strain, especially for essential and mid-range goods. Many such products continue to be taxed under India’s four-slab GST structure (5%, 12%, 18%, and 28%), leading to price pressures on end consumers.

Despite widespread calls for reform, the long-awaited GST rate rationalisation is under wraps. GST rate rationalisation has been pending since it was first seriously proposed at the 45th GST Council meeting in 2021.

From that point through the 55th GST Council meeting in December 2024, "rate rationalisation" has remained on the agenda but with no final decision in sight. Now, ahead of the upcoming GST Council meeting scheduled for next week, speculations are back in the spotlight.

Will the Council finally scrap the 12% GST slab to simplify the tax regime?

Who Will Cut GST Rates? The Answer Lies With the GST Council

Rumours abound that the 12% GST slab may soon come to reality by the end of July, 2025. If that happens, goods and services under this slab would either move down to 5% or up to 18%, depending on their classification and consumption category. However, such a change is not a unilateral decision.

As clarified in a written reply in Parliament by MoS Finance, Pankaj Chaudhary, GST rates can only be revised on the recommendation of the GST Council.

To examine this matter, a Group of Ministers (GoM) was formed during the 45th GST Council meeting held in September 2021. The group was tasked with reviewing the existing slabs and suggesting rationalisation.

However, no report has yet been submitted, leaving the reform in limbo.

What are GST Slab Rates? A Quick Guide

India’s GST structure operates on five major tax slabs, designed to balance revenue needs with affordability.

GST Slab	Tax Rate	Examples of Items
Nil (0%)	0%	Milk, eggs, fresh fruits & vegetables, sanitary napkins, bread, bangles
Low	5%	Tea, coffee, edible oil, sugar, domestic LPG, life-saving drugs, and garments under ₹1,000
Mid	12%	Ghee, cheese, butter, frozen meat, fruit juices, umbrellas, colouring books, and hotel rooms below ₹7,500
Standard	18%	Toothpaste, notebooks, mineral water, pasta, ice creams, mobile phones, and hotel stays over ₹7,500
High	28%	Luxury cars, air conditioners, refrigerators, cigarettes, gambling, and casino services. Additional cess is levied on some of these high-end or 'sin' goods.

How Do These Rates Apply to Goods and Services?

The way GST is applied varies based on interstate vs intrastate transactions:

For interstate supply, IGST (Integrated GST) is levied.
For intrastate supply, the tax is split equally between CGST (Central GST) and SGST (State GST).

Example:

Let’s assume a smartphone attracts 12% GST.

Transaction Type	Applicable Taxes	Breakup
Maharashtra to Gujarat	12% IGST	IGST: 12%
Within Maharashtra	12% CGST + SGST	CGST: 6%, SGST: 6%

This ensures consistency in tax liability, regardless of geography, while enabling fair revenue sharing between the Centre and States.

What Will Happen if 12% GST Is Removed?

Removing the 12% slab could simplify the GST system, but it’s not without complications. As per experts, reallocating goods to either 5% or 18% will have both economic and political ramifications.

If some essential or semi-essential goods shift from 12% to 18%, prices could rise, burdening the middle class.
On the other hand, shifting to 5% would mean revenue losses for the Centre and States.
The bigger concern: items like medicines and tractors, which fall under the 12% bracket, cannot be uniformly shifted without policy trade-offs.

Pros and Cons of Eliminating the 12% Slab

Positive Effects	Negative Effects
Simplifies tax structure. This means easier compliance for businesses	Risk of inflation for goods moving to 18%
Reduces classification disputes for businesses and tax authorities	Revenue shortfall if high-volume goods shift to 5%
Aligns with global best practices of fewer tax rates	Impact on sectors like pharma, agriculture (tractors) if moved to higher slab
Encourages clarity and predictability for pricing and supply chain planning	May require transitional policy and sector-specific exemptions

Additionally, political considerations make this decision even more complex, especially in the pre-election year.

Conclusion

Despite the media buzz and ongoing speculation, the Finance Ministry has clearly stated that there is no active proposal to reduce GST rates at this point. The decision lies entirely with the GST Council, whose GoM is yet to submit its report.

As inflation continues to affect household budgets, the call for GST rationalisation is growing louder. While a simpler GST regime would be welcomed by businesses and consumers alike, the complexity of India’s consumption patterns and state-level revenue dependencies makes this a high-stakes reform.

The upcoming GST Council meeting next week might not bring final answers, but it could offer clues on where things are headed.

Other News Pages
Big Govt Payments to Move via RBI e-Kuber from July 16	RBI Ends Prepayment Penalties, Relief for Small Borrowers	RBI Fines HDFC Bank & Shriram Finance for Compliance Lapses	Indian Banks’ Role in Empowering Women SHGs Highlighted
Centre Disburses ₹30,000 Crore Interest-Free Capex Loans to States	Equitas Small Finance Bank May Raise Capital via NCDs on July 21	Maharashtra: Online Hypothecation Removal for Vehicle Loans Explained	Loan via UPI Soon: Withdraw Credit from Gold, FDs, Property
RBI’s Record Fund Infusion Fails to Boost Loan Growth	ADB Approves ₹975 Crore Loan for Industrial Infra in Tripura	Ex-ICICI CEO Chanda Kochhar Guilty in Videocon Loan Case	Private Banks See Spike in Bad Loans from Agri & Small Lending
RR District Re-Launches Loan Scheme for Persons with Disabilities	No GST Rate Cut Yet, Final Call with GST Council	JPMorgan May Launch Loans Backed by Bitcoin, Stablecoins	Wilful Defaulters Owe ₹1.62 Lakh Crore to PSU Banks: Govt
Laxmi India Finance to Raise ₹254 Crore via IPO from July 29	Raghuram Rajan Urges Focus on Local Governance in Finance Panel	Agri Loans Cross ₹28 Lakh Crore; Govt Denies Waiver Plans	Petronet Seeks ₹12,000 Crore Local Loan for LNG Projects