GST Rate Cuts and Economic Impact in India

• The GST Council authorized a new paradigm in the indirect tax regime on September 3, 2025, reducing GST rates and Goods and Services Tax (GST) on most items.

• The rationalisation of multiple GST rates has been ongoing, with a Group of Ministers (GoM) formed in September 2021.

• The Union government submitted its proposal to the GoM on August 15, 2025, which was accepted and forwarded to the GST Council.

• The existing GST structure has multiple rates, with main rates reduced to main slabs of 0%, 5%, 18%, and 40%.

• The compensation cess for most items has been removed, with tobacco products still levied.

• Many items have been moved to lower tax slabs, with 413 items seeing rates cut and 40 items seeing rates increase.

• The effective tax incidence might not have increased as the effective tax rate on luxury cars and SUVs will go down to 40% once the compensation cess is added.

GST economic effects is important topic for Civil service exam (WBCS).

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