By Shailesh Yadav
New Delhi [India], September 8 : India could move towards a single Goods and Services Tax (GST) rate structure once the country achieves income parity across different segments of society, Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal said in an exclusive interview.
Speaking about the GST framework's future evolution, Agarwal explained that while a single rate would be ideal, the current multi-tier structure serves a social purpose.
"Presently we have one standard rate and other merit rate. Merit rate has been kept lower than the standard rate keeping in mind that in our society, there are different segments and to make things affordable, a merit rate has been kept for daily use items of common man," he said.
The CBIC chief linked the potential transition to India's development trajectory, stating, "India is aspiring to be a developed nation - Viksit Bharat by 2047. Once you become a developed country and there is parity in income in different class of societies, then I think we can also have one rate like in other developed countries."
"Major Relief for Automobile SectorThe most significant immediate impact of the latest GST Council recommendations will be felt in the automobile sector, where rates are set to drop substantially from 22 September 2025. Car buyers will see effective tax rates fall from the current combination of 28% GST plus compensation cess ranging from 1-22%, which resulted in total rates of 41-50%.Under the new structure, cars will attract either 18% GST or 40% for mid-segment and luxury vehicles - a significant reduction that has already energized the automobile industry. Car companies, even before September 22, are coming out with advertisements offering discounts to customers so that there is an uplift in demand," Agarwal noted.
Several manufacturers have announced price reductions and model-specific discounts to be effective from the new rate implementation date.
The CBIC Chairman reported an overwhelmingly positive response from industry stakeholders to the rate cuts across multiple product categories.
"Industry is very upbeat that rates have been cut on so many items. They themselves are spreading awareness among consumers that rates have been cut and benefits will be passed on to end customers," he said.
In what appears to be a voluntary commitment by industry players, Agarwal highlighted that several industrialists have publicly pledged to pass on the full benefit of tax cuts to consumers without retaining any portion for additional profits.
According to Agarwal, the department has put in place comprehensive transitional arrangements. For goods already in the supply chain that were taxed at higher rates before leaving manufacturing facilities, distributors, dealers and retailers will be entitled to full Input Tax Credit (ITC) for taxes paid at the higher rate.
"Whatever tax has been paid, that ITC can be utilized for making payment in their monthly returns for discharging their liability," Agarwal explained, adding that this transition period is expected to last about a month.
The GST Network (GSTN) IT system has been fully updated with the new rates, and early feedback suggests that industry players are also updating their systems to ensure smooth invoice generation from September 22.The rate rationalization represents one of the most significant reforms in India's indirect tax structure since GST implementation, with the automobile sector poised to be the biggest beneficiary of the new framework.
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