GST Rate Overhaul: Which Items Could See Big Tax Shifts?

Date: September 3, 2025

The Goods and Services Tax (GST) Council is on the brink of introducing some of the most significant changes in India’s tax structure. As the Council plans to discuss the rationalisation of GST rates, industry experts and consumers alike are keenly waiting to see which goods and services will see lower or higher taxes. This much-anticipated meeting is expected to bring in a series of proposals aimed at streamlining the existing tax structure to improve economic growth while balancing the needs of both businesses and consumers.

Over the years, GST has become the backbone of India’s indirect tax system, creating a unified taxation mechanism that has eliminated several complexities. But the demand for more tax relief, particularly for essential goods and services, has prompted the government to consider revisiting the tax slabs. The upcoming discussions may offer much-needed relief to some sectors, while others might face higher tax burdens. Let’s take a deeper dive into the goods and services that could see a shift in their tax rates and how it could impact both consumers and businesses.

What Could See Lower GST Rates?

1. Essential Food and Daily Necessities One of the major proposals being considered is to reduce the GST rates on essential food items like pulses, grains, and cooking oil. With food inflation continuing to put pressure on the household budget, the government is looking at ways to make these basic goods more affordable. A reduction in GST would not only bring down prices but also make it easier for the common man to access nutritious food. Lowering taxes on food items could significantly help lower-income groups who spend a higher percentage of their income on essential goods.
2. Healthcare and Medicines The health sector has been facing growing challenges due to the rising cost of medical treatments. In response, the GST Council is looking at reducing tax rates on a range of healthcare services, including diagnostics, medical devices, and pharmaceuticals. This is especially significant given the government’s push to make healthcare more accessible for all. By lowering taxes, healthcare services could become more affordable, benefiting those in need of medical assistance. It may also encourage the expansion of healthcare facilities, helping the country meet its healthcare goals.
3. Electric Vehicles (EVs) With a focus on sustainability, the GST Council is considering reducing the tax burden on electric vehicles (EVs) to promote their adoption. The Indian government has been taking proactive steps to reduce carbon emissions and promote clean energy. In this context, offering tax relief to EV manufacturers and consumers could accelerate the transition from fossil-fuel-driven vehicles to electric alternatives. Lower taxes on electric vehicles could make them more affordable for middle-class families and boost sales in the electric mobility market, which is a growing segment in India.
4. Solar Energy Products and Services The government has also proposed reductions in GST rates for solar products and services as part of its continued focus on renewable energy. Solar panels, inverters, batteries, and other related equipment may see their tax rates slashed to encourage a switch to cleaner energy sources. This move is in line with the government’s vision to reduce its dependence on fossil fuels and increase the adoption of green energy solutions. By lowering taxes on these products, it will become easier for consumers and businesses to transition to solar power, making it an attractive and affordable option for many.

What Could See Higher GST Rates?

1. Luxury Goods and High-End Services Luxury products like expensive watches, designer handbags, and high-end cars could be subjected to higher GST rates under the new proposals. The rationale behind this is to make luxury items more expensive for the affluent sections of society while increasing the government’s revenue. Higher taxes on these goods would likely reduce demand in the luxury sector but could boost the tax collection for the government. This would also help address the demand for a more progressive tax system where the wealthy contribute more.
2. Tobacco and Alcohol Products There has been a longstanding debate over whether to increase GST rates on tobacco and alcohol, both of which are harmful to public health. The government is considering raising taxes on these products not only to discourage consumption but also to generate additional revenue for health programs. Raising the tax rates on tobacco and alcohol could help in controlling their consumption, particularly among youth, while addressing public health issues related to smoking and drinking.
3. Imported Goods Imported goods, especially luxury items and non-essential products, may also see higher GST rates as part of a strategy to boost domestic manufacturing. By imposing higher taxes on imported goods, the government intends to make locally produced alternatives more attractive to consumers. This could support Make in India initiatives by encouraging people to buy Indian-made products, thus creating a favorable environment for domestic industries to grow and thrive.
4. Real Estate and Premium Housing Another sector that may face increased tax rates is the real estate market. High-value properties, especially premium residential units, could see their GST rates rise. This could be done to discourage speculative investments in real estate and reduce the price volatility in the housing market. Additionally, the move would help increase tax collection from the real estate sector, which is one of the key contributors to the economy. The government may also look at raising taxes on commercial properties to bolster the tax revenue further.

How Would These Changes Affect Different Sectors?

The proposed changes to the GST structure will have varying impacts across different industries. Reducing taxes on essential goods and healthcare services would provide much-needed relief to consumers, particularly those from lower-income groups. It would also ensure better access to quality medical care, which has become a growing concern in India.

In contrast, raising taxes on luxury goods and alcohol could reduce consumption in these sectors. While this would likely lead to lower demand in the luxury segment, it would allow the government to increase revenue from high-end products that are often consumed by the wealthy. The rise in tax rates on imported goods could encourage domestic manufacturing, aligning with the government’s broader vision of self-reliance.

For the automotive and real estate sectors, lowering the GST on electric vehicles and solar products would encourage green alternatives, helping India make progress in its environmental goals. However, any increase in taxes on high-value real estate transactions could result in a slowdown in the luxury housing market.

What Does the Future Hold for GST in India?

GST rate rationalisation is crucial to India’s ongoing economic growth and stability. The simplification of tax structures through rate cuts on essential items and a higher focus on luxury goods could strike a balance between economic growth and fairness. It would also bring in greater efficiency, reduce corruption, and improve transparency in the tax system.

The GST Council’s upcoming decisions will likely have a lasting impact on sectors like healthcare, electric mobility, and luxury goods. These discussions are part of an ongoing effort to ensure that the Indian tax system is fair, progressive, and reflective of the current economic environment. Whether the proposed changes will pass and how they will affect India’s consumers and businesses remains to be seen.