The Finance Ministry has announced a revised structure for the Central Goods and Services Tax (CGST), effective September 22, 2025. Under the new framework, GST will operate under a simplified two-tier system, with the majority of goods and services now taxed at either 5% or 18%. The move aims to streamline the indirect tax regime, reduce classification disputes, and improve ease of compliance for businesses.
Key Highlights
- Two-Tier Structure: The revised GST system consolidates multiple slabs into two primary rates—5% for essential items and 18% for most goods and services.
- Rationale: The government intends to reduce litigation around product classification while ensuring a balance between revenue collection and consumer affordability.
- Impact on Businesses: Companies will need to reassess their pricing models and update billing systems in line with the new rates before the September 22 rollout.
- Consumer Benefits: Essential commodities taxed at 5% are expected to remain affordable, while luxury items and non-essentials will continue to attract higher rates.
- Transition Window: The Central Board of Indirect Taxes and Customs (CBIC) has issued notifications and guidelines to help businesses make a smooth transition.
Who Should Take Action – Specific Advice
Manufacturers, retailers, and service providers should immediately review their GST compliance systems, update software, and train staff to apply the new rates correctly. SMEs must take extra care in adjusting invoices and contracts to avoid penalties. Consumers should monitor how businesses reflect these changes in pricing, particularly for essentials.
India Advocacy Insight
The new GST framework reflects the government’s intent to simplify taxation while maintaining fiscal stability. For businesses, this is both a compliance challenge and an opportunity to demonstrate transparency in pricing. Over time, a streamlined tax regime could enhance investor confidence, reduce disputes, and improve the overall efficiency of India’s indirect tax system.
