The central government is preparing for one of the most significant reforms in the Goods and Services Tax (GST) regime since its launch in 2017. According to CNBC TV18, the Group of Ministers (GoM) on rate rationalisation is likely to table proposals aimed at reducing the number of tax slabs and shifting towards a simpler two-rate system of 5 per cent and 18 per cent.
Drugs and cancer medicines likely to get cheaper
The reform proposals put healthcare at the forefront. All drugs and medicines currently taxed at 12 per cent are expected to be moved to the 5 per cent bracket, significantly easing the cost burden for patients.
In addition, about 30 cancer medicines are likely to be made entirely tax-free, along with certain life-saving drugs for rare diseases. Medical-grade oxygen, iodine, and potassium iodate may also see a tax cut from 12 per cent to 5 per cent, adds CNBC TV18 report.
At present, India’s GST is structured under four main slabs—5 per cent, 12 per cent, 18 per cent, and 28 per cent, in addition to exemptions and cess on specific items. Under the new proposal, most goods would be taxed either at 5 per cent or 18 per cent, drastically reducing complexity.
According to the proposal, GST on economy cinema tickets has been reduced to 5% from the current 12%, while premium air tickets will now attract 18% GST, up from 12% at present.
Daily-use items to get cheaper
Durables such as washing machines, air conditioners and refrigerators are among the items that could benefit from lower rates. By reducing tax incidence on commonly used items, the Centre hopes to boost consumption and improve compliance.
The proposed GST rate rationalisation is set to make a wide range of essentials more affordable. Agriculture and allied sectors will benefit as fertiliser acids, bio-pesticides, micronutrients, drip irrigation systems, tractors and their parts move from 12–18% GST to just 5%. Renewable energy devices such as solar cookers and water heaters will also see lower taxes.
Textiles and handicrafts, including synthetic yarns, carpets, handicraft idols, terracotta tableware, and footwear priced below Rs 2,500, will attract only 5% GST. Everyday education supplies like maps, atlases, sharpeners, pencils, crayons, exercise books, and geometry boxes will also become cheaper.
Healthcare receives the biggest relief: all medicines drop to 5%, over 30 cancer and rare-disease drugs go tax-free, while surgical instruments, oxygen, gloves, and diagnostic kits will be taxed at just 5%.
Food items such as butter, ghee, dry fruits, confectionery, juices, ice cream, cereals and even packed drinking water will also see reduced GST, easing household budgets.
New GST report to counter Trump tariff
According to BMI, a Fitch Solutions company, the proposed changes could help offset the potential drag from external shocks such as the 50 per cent tariffs announced by the United States on Indian goods. By lowering tax rates on “common man items,” the reforms are expected to stimulate domestic demand and strengthen resilience in the face of global trade challenges.
GST has steadily grown into the second-largest source of fiscal revenue after income tax, accounting for around 30 per cent of total collections and about 2.5 per cent of GDP in FY 2024–25. Analysts say rationalising rates now will not only simplify administration but also consolidate GST as a robust revenue pillar.
The new GST proposals will be discussed at the upcoming GST Council meeting on 3–4 August, chaired by the Union Finance Minister. The new tax slab was announced by PM Narendra Modi as Diwali bonanza during his Independence Day speech on August 15 this year.
