The Goods and Services Tax (GST), which was once introduced with the slogan “one nation, one tax”, has now taken another big step toward that promise. In its 56th meeting this week, the GST Council decided to cut down the four-slab system to just two—5% and 18%. The move has sparked mixed reactions across the political spectrum but has been welcomed by businesses and market watchers who see it as a major relief.
Until yesterday, India’s GST structure had four major slabs—5%, 12%, 18% and 28%. Over time, this created confusion and uneven tax burdens. After the new reform, only two slabs remain—5% and 18%. Goods and services that were earlier taxed at 12% and 28% have been re-distributed into the two surviving categories.
Apart from simplification, the Council has also exempted several essential items. Life and health insurance will no longer attract GST. Medicines for critical illnesses and daily-use drugs have also been pushed into the zero-tax category. Food staples such as paneer, bread and even UHT milk have been freed from tax, giving some relief to households already stretched by inflation.
Big consumer goods like televisions, washing machines and air-conditioners will now fall under the 18% slab instead of 28%. This is expected to bring down prices in the coming months, especially if manufacturers pass the benefit to buyers.
Former NITI Aayog CEO Amitabh Kant called the reform “a major step forward.” He explained that a simpler tax system reduces compliance costs for businesses, creates space for investment, and helps boost demand. If people spend more because essentials and consumer goods are cheaper, companies are forced to produce more, which eventually means more jobs.
Markets seem to agree. Soon after the announcement, shares of automobile companies and consumer brands rose, showing investor confidence that demand will get a lift.
Not everyone is celebrating. Congress president Mallikarjun Kharge took a sharp dig at the government, saying the promise of “one nation, one tax” had actually turned into “one nation, nine taxes” over the years. He accused the government of waking up too late, pointing out that his party had pushed for GST simplification in both 2019 and 2024 election manifestos.
Senior Congress leader and former Finance Minister P. Chidambaram also joined in, arguing that the multiple-slab system should never have been introduced in the first place. According to him, the government has made a U-turn after eight years, while consumers and businesses carried the burden all this time.
State governments have also voiced concerns. Kerala has warned of losing nearly ₹10,000 crore every year due to lower revenues, while Jharkhand has asked for extra compensation from the Centre. This highlights the challenge of balancing simplicity with the need for states to maintain fiscal health.
While rate cuts make headlines, experts warn that implementation will decide whether the benefits reach ordinary people. Manufacturers and retailers must pass on lower taxes to customers; otherwise, the reform risks becoming only a paper exercise.
Kant also cautioned that GST rationalisation alone cannot drive long-term growth. India still needs to cut energy and logistics costs, make manufacturing competitive, and create quality jobs. Without these, cheaper goods may only give temporary relief.
The GST reform of 2025 is being seen as one of the most significant changes since the tax was launched in 2017. By moving to just two slabs, the government has made the system simpler and more consumer-friendly. Essentials getting tax-free status will ease household budgets, while lower rates on goods may push demand higher.
However, the debate is far from over. Opposition leaders call it “too late,” and states worry about shrinking revenues. The real test will come in the months ahead, as buyers check prices at shops and state treasuries count their collections. For now, though, the promise of a cleaner GST looks closer than before.