Overview

• The Finance Ministry has proposed collapsing the four main GST slabs into two rates of 5% and 18%, alongside a narrowed 40% special rate for select sin and luxury goods.
• Roughly 99% of items taxed at 12% are proposed to move to 5%, and about 90% from the 28% slab to 18%, which could lower prices for FMCG, small cars, ACs, TVs, cement and insurance if approved.
• The GoM on rate rationalisation meets August 20–21, with Finance Minister Nirmala Sitharaman slated to brief states; the GST Council is expected to take up the plan in September–October, targeting a Diwali rollout subject to consensus.
• Analysts estimate an annual revenue shortfall of about Rs 1.1–1.8 lakh crore; officials argue higher consumption and existing buffers such as RBI/PSU dividends and residual cess can offset the impact.
• The COVID-era compensation cess is expected to lapse ahead of schedule, reportedly by November, and the reform is projected to ease inflation by roughly 50–60 basis points.