Overview

• Ministers in New Delhi are considering compressing GST to 5% and 18% with a new 40% band for sin and luxury goods, phasing out the 12% and 28% slabs.
• About 175 items are on the rate‑cut list, with proposals to move many personal care goods to 5% and white goods to 18%, alongside a plan to exempt individual health insurance premiums at an estimated annual cost of around ₹10,000 crore.
• Auto proposals include shifting small cars, hybrids and many two‑wheelers to 18%, with larger vehicles moving to 40%, while the treatment of electric vehicles differs across drafts and remains under discussion.
• Opposition‑ruled states cite potential annual shortfalls of ₹85,000 crore to ₹2 lakh crore and seek a multi‑year compensation mechanism as the compensation cess winds down.
• The package pairs rate changes with administrative simplification such as pre‑filled returns and automated refunds, and follows a GoM endorsement, with markets eyeing potential gains for FMCG and footwear highlighted by brokerages.