New Delhi | September 3, 2025 : The 58th meeting of the Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman, begins today with a sharp focus on GST reforms. The agenda includes sweeping rate cuts across nearly 175 items and a major step toward rationalising the tax structure.

What We Know So Far

The GST Council brings together union and state finance ministers, tasked with simplifying India’s indirect tax regime. An officers’ meeting held on Tuesday prepared the groundwork, setting the stage for reforms that align with Prime Minister Narendra Modi’s call for a simpler GST system.

At the core of the proposals is a shift from the current four-tier system—5%, 12%, 18%, and 28%—to a two-slab structure. Essential goods would be taxed at 5%, while non-essentials fall under 18%. A special 40% slab is being considered for “sin goods” like tobacco, high-end luxury cars priced above ₹50 lakh, and powerful two-wheelers.

Items Likely to See Rate Cuts

According to sources, GST rates could be slashed by at least 10 percentage points on around 175 items. For households, this may mean lower GST on daily-use essentials such as toothpaste, shampoo, talcum powder, and soaps—moving from 18% to just 5%.

Food items including butter, cheese, pickles, snacks, and chutneys may also be shifted to the 5% slab, giving relief to consumers and boosting FMCG companies like HUL, Godrej, and Nestle.

On the other end, white goods such as TVs, refrigerators, air conditioners, and washing machines may move from the 28% bracket to 18%. Cement is also likely to come down to 18% from 28%.

GST on Automobiles

Automobiles are expected to be a major talking point. Small petrol cars with engine capacity up to 1,200 cc may see GST reduced to 18% from 28%, a big win for manufacturers like Maruti Suzuki and Toyota.

Hybrid cars could get similar benefits, but electric vehicles may face a setback. Reports suggest GST on electric cars priced between ₹20–40 lakh could rise to 18% from the current 5%. Luxury EVs from Tesla and BYD may face an even higher rate.

Two-wheeler makers, particularly Hero MotoCorp, have long demanded GST reduction. The council may cut GST on two-wheelers to 18% from 28%. However, high-capacity bikes above 350 cc, dominated by Bajaj and Royal Enfield, may attract the proposed 40% luxury tax.

Rationalisation Goals

The bigger picture is structural simplification. Moving to two slabs would make compliance easier, reduce disputes, and streamline administration. The higher 40% slab on luxury items is designed to balance revenue losses from lower taxes on essentials.

States are expected to be compensated through a cess surplus of ₹40,000–50,000 crore, with plans to phase out compensation by October 31. The council will also address inverted duty structures, ensuring input taxes don’t exceed output taxes—a step that should benefit consumers and industries alike.

The outcome of this meeting could mark one of the most significant overhauls of GST since its launch, shaping the future of India’s tax system.