In a major move aimed at easing the financial burden on middle- and lower-income households, the Central government is considering significant changes to the Goods and Services Tax (GST) structure, sources have revealed. After a series of income tax concessions earlier this year, the Centre is now preparing to extend its relief measures through a reduction in GST rates.
According to insiders, the government is actively discussing the elimination of the 12% GST slab altogether. The plan involves either abolishing this tax category or reclassifying many items currently taxed at 12% into the lower 5% bracket. The initiative is expected to benefit millions of consumers, particularly from the middle class and economically weaker sections.
Targeted Relief for Everyday Essentials
The restructuring is aimed at making widely used household goods more affordable. Among the items likely to see a tax reduction are:
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Toothpaste and tooth powder
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Umbrellas
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Sewing machines
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Pressure cookers and kitchen utensils
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Electric irons and water heaters (geysers)
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Small-capacity washing machines
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Bicycles
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Readymade garments priced above ₹1,000
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Footwear priced between ₹500 and ₹1,000
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Stationery items
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Vaccines and diagnostic kits
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Ceramic tiles and solar water heaters
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Agricultural tools and mechanical threshers
If implemented, these changes will significantly reduce prices for essential products, providing much-needed relief amid rising living costs.
Simplification and Compliance
Apart from tax relief, the government is also aiming to simplify the GST structure to make it easier for businesses to comply. Finance Minister Nirmala Sitharaman recently hinted at a rationalization of GST rates, noting that relief for the middle class on essential goods was under active consideration.
Financial Implications and Long-Term Vision
Sources indicate that the government is willing to absorb an estimated revenue hit of ₹40,000 crore to ₹50,000 crore in the short term. However, the rationale is that lower prices will stimulate consumer demand, leading to increased consumption and, eventually, higher GST collections.
This pro-consumer approach, the Centre believes, will expand the tax base and create a more sustainable revenue model in the long run.
Opposition from States
Despite the Centre’s intentions, the proposal is facing resistance from several states, including Punjab, Kerala, Madhya Pradesh, and West Bengal. As GST is governed by the GST Council—where states have voting rights—any change to tax slabs requires Council approval.
Historically, the Council has operated on consensus, with only one instance of voting in its entire history. The upcoming 56th GST Council meeting, likely to be held later this month, will be crucial. A 15-day notice is mandatory to convene the meeting, as per the rules.
The Role of the 12% GST Slab
The 12% slab currently includes a mix of items that are neither luxuries nor absolute necessities, many of which are used daily by common households. Over time, some essential goods such as sanitary napkins have already been moved to a 0% tax category. However, many similar products remain in the 12% bracket, making them more expensive than they arguably should be.
Common Goods and Services Under the 12% GST Slab:
| Item Category | Examples |
|---|---|
| Personal Care | Tooth powder, branded toothpaste, hair oil, soaps |
| Household Goods | Pressure cookers, aluminium/steel cookware, electric irons, water heaters, sewing machines, small-capacity washing machines |
| Clothing & Footwear | Readymade garments (₹1,000+), footwear (₹500–₹1,000) |
| Transportation & Mobility | Bicycles, public transport vehicles, carriages for disabled persons |
| Health & Medicine | Most vaccines, diagnostic kits for HIV, Hepatitis, TB, some Ayurvedic and Unani medicines |
| Stationery & Education | Exercise books, geometry boxes, drawing books, maps and globes |
| Construction Materials | Glazed ceramic tiles, ready-mix concrete, prefabricated buildings |
| Food & Agriculture | Packaged condensed milk, frozen vegetables, solar water heaters, agricultural tools |
What Happens Next?
If consensus is reached in the upcoming GST Council meeting, consumers may soon see reduced prices across a wide range of everyday items. This would mark a major policy shift aimed at not only stimulating economic activity but also making daily living more affordable for millions of Indians.
The final call now rests with the GST Council. Until then, all eyes will be on how the states respond and whether political cooperation can help turn this ambitious proposal into a reality.
