GST Council Meets: Two-Slab Proposal & 5% GST on Apparel—Relief for Consumers?

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Date: September 3–4, 2025
Venue: New Delhi
Presiding Officer: Finance Minister Nirmala Sitharaman

What’s Happening:

The 56th GST Council session kicks off today with key discussions around restructuring GST slabs. Proposals include a simplified two-tier system of 5% and 18%, and a 40% “sin” tax for restricted goods
Items like ghee, nuts, 20-litre drinking water, non-aerated drinks, namkeen, footwear, apparel, medicines, and medical devices could see GST slashed from 12% to 5%
In particular, footwear and apparel priced up to ₹2,500 are expected to benefit from a new 5% tax rate—a boon for festive shoppers.
Electronics such as certain TVs, washing machines, and refrigerators might see reduced taxes if the 28% slab is merged down to 18%, potentially lowering prices.

Economic Pulse:

Markets are treading cautiously; Indian benchmarks are projected to open flat as stakeholders await the GST Council’s decisions. Nifty futures show limited movement, while foreign investors continue to withdraw funds
Analysts suggest a tax rate rejig could boost consumption-driven sectors like FMCG, which have already been rallying in anticipation

New Key Developments

Two-tier GST Structure Approved — The Council has greenlit a simplified tax slab comprising 5% and 18%, replacing the older 12% and 28% brackets
Expanded Relief for Apparel & Footwear — Items up to ₹2,500 (up from ₹1,000) will now attract only 5% GST, making them more affordable
Compliance Made Easier — MSME and startup GST registrations will now be processed within just 3 days instead of taking several weeks. Proposals also include automated GST refunds for exporters.
Refund Delays to Be Resolved — Industries such as pharmaceuticals, textiles, chemicals, and fertilizers will get stuck refunds cleared within 7 days
State Revenue Loss Concerns — Several opposition-ruled states (including Karnataka, Punjab, West Bengal, etc.) have pressed the Centre for compensation estimates to offset losses from tax cuts. Jammu & Kashmir projects a potential 10–12% revenue shortfall
Market Anticipation Grows — Investors across sectors—especially automobiles, consumer durables, and discretionary goods—are repositioning their portfolios in expectation of positive impacts from these reforms
Broad Political Support — The two-slab reform has received unanimous backing from all states, signaling strong intergovernmental consensus