12 percent GST Slab set to Scrap
Impact on Everyday Spending, Cheaper or Costlier
The nationwide Goods and Services Tax (GST) system could soon become simpler.
A proposal under active review by the GST Council suggests removing the existing 12 % tax slab.
Goods and services that now attract 12 % would shift either to the 5 % category or the 18 % category. The idea has broad support among officials and experts who advise the Council’s Group of Ministers (GoM).
12 percent GST Slab set to Scrap
Current GST framework or structure
Officials now argue that trimming the structure to three slabs (5 %, 18 %, 28 %) will cut complexity, reduce litigation, and keep overall revenue nearly neutral.
India’s GST launched in 2017 with four main slabs as shown below-
- 5 % – essential and mass consumption items
- 12 % – standard rated goods and services (mid tier)
- 18 % – most non essential products and services
- 28 % – luxury goods and sin categories
Reason of removal the 12 % bracket
The 12 % slab was designed as a stepping stone between low and standard rates.
Over time many industries have adjusted their inputs, credits and pricing models.
Analysts now find that merging the mid tier into neighboring slabs can have following benefits-
- Streamline filing and compliance for small businesses
- Lower classification disputes at tax offices
- Maintain revenue by balancing cheaper items with costlier ones
Range of Items come under 12 % bracket
Impact on following Products and services
- Processed food: butter, ghee, cheese, jam, fruit juice and traditional snacks
- Dried fruits and nuts: almonds, dates and cashews
- Household articles: umbrellas and furniture made of wood or cane
- Stationery and eco bags: pencils, crayons and jute or cotton carry bags
- Footwear priced below Rs. 1,000.00
- Diagnostic test kits and certain construction materials such as marble and granite
- Hotel rooms with a tariff up to Rs. 7,500.00 per night
- Domestic air travel (non economy class)
- Selected specialised construction and multimodal transport services
Also Read: ITR Filing Deadline Extended: CBDT New Date and ITR 2025-26 Updates
Impact on price movements
If the Council votes to abolish the 12% slab, two clear patterns are likely to emerge
- (i). Shift to 5 % | Cheaper Goods and Services
Items falling under the 5% rate will get instant price discounts. Here, prices may be reduced at retail stores for packaged snacks, basic stationery or economy segment furniture.
- (ii). Shift to 18 % | Costlier Goods and Services
If it rises to 18%, prices will definitely go up. Mid-range hotel stays, premium class air tickets or marble tiles may attract higher bills until businesses absorb some part of the increase.
When will it be finalized
The council, chaired by the Union Finance Minister and attended by state finance ministers is expected to meet in late June or early July 2025.
The plan may be finalised before the monsoon session of Parliament begins on July 21, 2025.
Economic goals
The goal of policy makers is to achieve economic goals
- Making Simple, predictable slabs that help small firms comply quickly
- To set stable GST revenue streams for both Union and state governments
- To prepare an easier platform for future rate tweaks if economic conditions change
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