September 4, 2025

The much-awaited GST Council meeting kicked off with all eyes glued to the decisions that could change India’s tax game! Chaired by Finance Minister Nirmala Sitharaman and joined by state finance ministers, this summit could soften tariff shocks and fuel festive shopping in a big way. The Centre has proposed a bold move: cut the four tax slabs into just two — 5% and 18%! What's more exciting? A sizzling 40% tax spot is set aside for luxury and harmful goods. Prime Minister Narendra Modi had already set hearts racing by announcing GST reform plans during his Independence Day speech. Now, that blueprint is in the spotlight, waiting for the Council's nod. Under this plan, nearly all items currently taxed at 12% will drop sharply to 5%. States will see most goods shifted from 28% down to 18%. Only expensive cars, tobacco, and select items face the fiery 40% bracket. One spicy debate that’s stealing the show is over electric vehicles (EVs). The Centre wants a low 5% tax to turbocharge EV adoption. But a Group of Ministers suggests EVs costing up to Rs 40 lakh should pay 18%. Will the lower tax win to push India toward cleaner mobility? If the plan passes, many household goodies like ghee, nuts, medicines, and even pencils and bicycles could become cheaper at the 5% rate. Electronics such as TVs and refrigerators might get friendlier prices too at 18%. Cars will see split taxes with basic models at 18% and luxury SUVs jumping to 40%. But wait, not all smiles here. Opposition-ruled states like West Bengal, Karnataka, Kerala, Tamil Nadu, and others fear big revenue losses. They want clear compensation to cover their shortfall. West Bengal said, “Any levy above the 40 per cent rate must be earmarked for states to offset losses.” The Centre counters, saying lower taxes will boost buying power, which will balance the books eventually. Compensation cess, a special tax on luxury items meant to compensate states for early GST revenue loss, is another hot topic. Originally set to end in June 2022, its timeline was extended to March 2026 but may end sooner—possibly by October 31 this year. This is urgent because of the need to repay Covid loans taken by the Centre to help states. The GST Council is balancing a tightrope—simplifying taxes, encouraging clean tech like EVs, helping consumers, and keeping states financially stable. The festive seasons ahead could see cheaper products and a tax system that’s friendlier—but only if all agree on this bold GST 2.0 plan!

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Tags: Gst reform, Tax slabs, Electric vehicles, State revenues, Compensation cess, Gst council,