If you are planning to shop soon, it may be worth waiting. The government is preparing to give consumers a major relief before Diwali through a new GST reform. Prime Minister Narendra Modi had announced on August 15, 2025, from the Red Fort that GST would be simplified. The plan now is to move to only two tax slabs, 5 per cent and 18 per cent. The ministerial panel that met in Delhi on August 20 and 21 approved the Centre’s proposal to remove the 12 per cent and 28 per cent slabs.
According to reports, the government is considering bringing textiles and food items under the 5 per cent GST bracket. Under the “next generation GST reform,” the aim is to reduce the tax burden on citizens. Some essential services may also see GST rates cut from 18 per cent to 5 per cent.
The construction and infrastructure sectors, which have long demanded relief, could also benefit. A proposal to cut GST on cement from 28 percent to 18 percent is on the table. Term insurance and health insurance may be made tax free. Small cars up to four meters may continue under 18 per cent, while bigger cars may remain in the 40 per cent slab.
Current GST rates
Sweets and food items: Non-branded sweets are taxed at 5 per cent. Branded and packaged sweets fall under the 18 per cent slab.
Clothes: Garments priced up to Rs 1,000 carry 5 per cent GST. Items above that are taxed at 12 per cent.
The final decision will be taken at the 56th GST Council meeting on September 3 and 4, chaired by Finance Minister Nirmala Sitharaman. The reforms are expected to be rolled out before the festive season of Dussehra and Diwali.
Officials from the GST fitment committee have estimated that the changes could impact Centre and state revenues by around Rs 40,000 crore.