GoM Backs Major GST Reform: 12% and 28% Slabs to Be Abolished, Two-Slab System Proposed

New Delhi, 21st August 2025: The path to GST 2.0 has been cleared with a major step towards rationalizing Goods and Services Tax (GST) rates. The Group of Ministers (GoM) constituted for reviewing the current structure has recommended cutting down the four existing slabs to just two—5% and 18%.

In a key meeting held on Thursday, the state ministers’ panel accepted the Centre’s proposal to abolish the 12% and 28% tax slabs. The move is aimed at simplifying India’s indirect tax regime and ensuring benefits for the common man.

Two GST slabs instead of four
At present, GST is divided into four slabs—5%, 12%, 18%, and 28%. Under the new structure, most goods and services will now be taxed either at 5% or 18%. A higher tax rate of 40% will continue to apply to tobacco products and select luxury items, with luxury cars also proposed to be brought under this bracket.

According to the GoM’s recommendations:
Nearly 99% of items taxed at 12% will move to the lower 5% slab.
Around 90% of items currently in the 28% category will be shifted to the 18% slab.

When will new GST rates be implemented?
The recommendations will now be forwarded to the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states. The Council will review the proposals in its upcoming meeting before taking a final decision. The new rates will come into effect only after the Council’s approval.

Who was part of the GoM?
The Group of Ministers was chaired by Bihar Deputy Chief Minister Samrat Chaudhary. Other members included Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, and Kerala Finance Minister K.N. Balagopal.

If approved, this reform will mark the launch of GST 2.0, designed to simplify tax compliance and bring relief to businesses and consumers alike.