Govt plans to revamp GST by Dussehra 2025: Centre faces Rs 40,000 crore revenue shortfall

The government is preparing to roll out a simplified GST structure with just two tax slabs—5% and 18%—and a 40% levy on sin goods, but it comes with a projected revenue hit.

The Centre is gearing up for the most sweeping reform to the Goods and Services Tax (GST) regime since its rollout in 2017. According to Finance Ministry sources, the government expects a potential revenue shortfall of nearly Rs 40,000 crore as it simplifies the tax structure into two primary slabs.

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The Fitment Committee of GST Secretariat officials has drafted proposals recommending a two-tier GST structure, 5% and 18%, along with a 40% levy on sin goods such as tobacco and alcohol. The move, endorsed by the Group of Ministers on rate rationalisation, will eliminate the existing 12% and 28% slabs.

While the new structure promises greater clarity and reduced burden on the common man, it also poses fiscal challenges. The Centre is set to lose another Rs 20,000 crore from GST and TDS collections after its recent decision to curb online gaming platforms.

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Some relief measures are also under discussion. The government is considering removing GST on individual health and life insurance premiums, a step aimed at easing the financial burden on middle-class families. Officials believe the revenue dip from this exemption will be short-lived and can be balanced out through higher consumer spending.

Meanwhile, the 56th meeting of the GST Council is scheduled to take place in New Delhi on September 3 and 4, preceded by an officers’ discussion on September 2.If cleared, the government aims to implement the new GST rates by Dussehra. Prime Minister Narendra Modi, in his Independence Day speech, described the reform as a “Diwali gift” to citizens, promising to ease the tax burden and boost economic growth.

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