The stage is being set for what could be the most significant overhaul of India’s Goods and Services Tax (GST) regime since its rollout in 2017. According to government sources, three crucial Groups of Ministers (GoMs) will convene over the next week to deliberate on proposals that are expected to form the backbone of Prime Minister Narendra Modi’s recently announced “Next Generation GST Reforms.”
Key Meetings Scheduled
These meetings come just days after the Prime Minister, in his Independence Day address, called for a simplified two-rate GST structure aimed at reducing compliance burden, improving ease of doing business, and providing relief to consumers. The blueprint under discussion proposes a standard 5% rate for mass consumption items and an 18% merit rate for most other goods and services, reserving a 40% bracket only for select luxury and sin goods.
GoM on Compensation Cess
Scheduled for August 20, this panel is headed by Minister of State for Finance Pankaj Chaudhary. It will deliberate on the roadmap for gradually phasing out the compensation cess, which was originally imposed to compensate states for GST revenue shortfalls. With the five-year compensation window ending, discussions are expected to focus on transition mechanisms and fiscal implications for both the Centre and the states.
GoM on Life & Health Insurance
Also meeting on August 20, this group is chaired by Bihar Deputy Chief Minister Samrat Choudhary. The panel is expected to examine lowering GST on insurance premiums — currently taxed at 18% — to a much lower band, possibly 5% or even Nil for certain categories. A reduction here would directly impact household budgets and could boost the penetration of health and life insurance products.
GoM on Rate Rationalisation
The most critical panel, also headed by Samrat Choudhary, will meet on August 21. This GoM will weigh the Centre’s proposal to move towards a two-tier GST rate structure, a move considered central to “GST 2.0.” The discussions will include recalibrating existing slabs (0%, 5%, 12%, 18%, and 28%) into a simplified framework of just 5% and 18%, while keeping a higher bracket for sin goods.
Why These Meetings Matter
The upcoming deliberations are seen as pivotal in shaping the contours of GST reforms expected to be rolled out around Diwali, billed by policymakers as a “Diwali bonanza.” The Prime Minister has underscored that GST simplification is essential to spur consumption, reduce litigation, and bring India’s indirect tax system closer to international best practices.
Currently, the multiplicity of slabs — including 12% and 28% in addition to the standard 5% and 18% — has led to distortions and classification disputes. By collapsing them into two broad rates, the government aims to eliminate ambiguity, reduce compliance burden for businesses, and lower the cost of essential goods and services for consumers.
Experts note that lowering GST on insurance could be a game-changer, especially in light of India’s low penetration levels. Similarly, rationalising rates on automobiles, clothing, and footwear — categories expected to benefit under the proposed reforms — could provide a direct boost to consumption demand.
The Road Ahead
The recommendations from these GoMs will be submitted to the GST Council, chaired by Finance Minister Nirmala Sitharaman. If approved, the new rate structure could be implemented as early as the festive season, in line with the government’s plan to roll out reforms by Diwali.
Tax expert Abhishek A Rastogi, founder of Rastogi Chambers, notes, “This is not just rate rationalisation; it is a structural reset. By focusing on simplicity, predictability, and fairness, GST 2.0 could help address many pain points businesses and consumers have flagged since 2017.”
For the Centre, these reforms represent an opportunity to strengthen compliance, widen the tax base, and build trust in the GST framework as it enters its ninth year. With the political will now signaled at the highest level, the upcoming GoM meetings will be closely watched as the first decisive step towards India’s GST 2.0.
