- GST Rate Simplification
India is moving toward a simplified two-slab GST structure—5% and 18%, with a 40%
“sin/luxury” rate reserved for select products. This is a significant overhaul from the
existing four-tier system (5%, 12%, 18%, 28%). The intent is to streamline compliance, spur
consumption, and make essential goods more affordable.
- Tax Relief for Insurance and Small Cars
There’s a proposal from the Group of Ministers to exempt GST (18%) on individual health and life insurance premium potentially reducing it to 0%.
GST on small petrol and diesel cars may be reduced from 28% to 18%.
The reforms are expected to be finalized by the GST Council in September or October 2025, possibly aligning with Diwali.
- Fiscal Impact & Economic Goals
Implementation of these reforms could potentially boost consumption by ₹1.98 lakh crore, while also potentially causing a revenue loss of ₹85,000 crore annually.
Analysts view these reforms as the most significant GST overhaul since 2017, likely to deliver relief to households and MSMEs, while promoting ease of doing business.
