PMO green‑lights major GST overhaul, Council meeting in August to mull sweeping reforms

The Prime Minister’s Office (PMO) has given in-principle approval for the most comprehensive revamp of the Goods and Services Tax since its rollout in 2017, according to government and industry sources.

The exercise aims to simplify multiple tax slabs and streamline procedures to boost compliance and consumer spending.

A key proposal under active discussion is the elimination of the 12% slab, with items redistributed to either the 5% or 18% categories. Currently, about 19% of items fall under the 12% rate, outweighing the 3% in the highest 28% slab.

The rationalisation would reduce complexity and support a stable tax structure.

The finance ministry has begun stakeholder and inter-ministerial consultations to build consensus, particularly among state governments, ahead of formally tabling the proposal at the GST Council meeting in August, following the monsoon session of Parliament.

A dedicated ministerial panel is also exploring procedural reforms to reduce compliance burdens for businesses. The revamp comes as GST stabilises with strong macroeconomic conditions, and as India negotiates free trade agreements with advanced economies—prompting the government to ensure domestic competitiveness.

Attention is also on the compensation cess, currently financing state losses and extended until March 2026. A separate panel will advise on utilising unspent cess surplus.

Industry leaders have long advocated for simplifying GST’s five-tier rate system (0%, 5%, 12%, 18%, 28%), with two additional special rates (0.25%, 3% for bullion).

The proposed changes target the most troublesome slabs to support smoother taxpayer experience and enhanced revenue predictability.