Daily-Use Goods, Food Items Likely to Come Under 5% GST Slab in New Reforms: Sources

New Delhi, Aug 16 — Under the upcoming GST rationalisation exercise, most items of daily use and food products are expected to be shifted to the lowest 5% slab, government sources said on Friday. The Centre is working closely with states to build consensus on the proposal, which aims to ease the tax burden on citizens and boost consumption.

If implemented, the move is expected to significantly push demand and positively impact GDP. Officials said no legislative amendments are required for this change.

The reforms, coming after Prime Minister Narendra Modi’s Independence Day announcement of a “double Diwali” gift, are centred on three pillars: structural reforms, rate rationalisation, and Ease of Living.

According to sources, the plan involves:

• Scrapping 12% and 28% slabs to streamline GST into mainly 5% and 18%.
• Shifting 99% of items in the 12% bracket to 5%, and 90% of 28% slab items to 18%.
• Creating a new 40% slab for “sin goods” such as tobacco and pan masala.

While the restructuring could marginally affect GST collections, officials believe it will energise sectors like agriculture, textiles, fertilisers, renewable energy, healthcare, construction, and MSMEs.

On the compliance side, the proposal seeks to simplify processes with:

• 95% registrations cleared within three days.
• Pre-filled returns to cut manual intervention.
• Automated refunds to reduce delays and mismatches, especially for exporters and MSMEs.

The GST Council is expected to discuss the proposal between September and October.

During his Independence Day address, PM Modi said: “This Diwali, people will receive a very big gift. Common-use items will become cheaper, MSMEs will benefit, and our economy will get a fresh boost.”