Overview

• The draft proposes collapsing four existing GST slabs into 5 percent and 18 percent rates with a separate 40 percent top rate for select demerit goods.
• About 99 percent of items in the current 12 percent slab would move to 5 percent and roughly 90 percent of those in the 28 percent bracket would shift to 18 percent, potentially trimming headline inflation by 50–60 basis points.
• Three Groups of Ministers composed of state finance ministers will meet on Aug. 20–21 to examine the draft and forward their recommendations to the GST Council.
• Finance Ministry officials maintain the overhaul will be fiscally sustainable and note that the compensation cess is set to lapse in November instead of March 2026.
• Analysts warn of an annual revenue shortfall of around Rs 1.2 lakh crore, prompting states to prepare demands for new cesses or enhanced revenue-sharing arrangements.