New GST Rates: Textiles, Auto, Agriculture Among Sectors to Benefit; Online Gaming to See Higher Taxes

The Centre has proposed a simplified two-slab structure of 5% and 18% in the new Goods and Services Tax (GST), slated to replace the existing indirect tax regime by Diwali this year.

The government has sent its proposal, seeking to remove 12% and 28% slabs, to the panel of state finance ministers on GST rate rationalisation. The proposal will now be discussed and placed before the GST Council, which is expected to meet next month.

Sectors that Benefit vs Sectors that will See Higher Taxes

The GST charged on essential food items will remain nil or zero%, while that on daily use items will be 5%. On the other hand, the GST on electronics and services will be 18% and on luxury and sin goods will be 28%. The revised GST regime will have two slabs plus a special rate of 40% for luxury and sin goods, as per a PTI report.

The revamped structure is approved by the GST Council and 99% of items in the current 12% slab will move to the 5% bracket. In a similar way, almost 90% of goods and services that are currently charged at 28% will be shifted to an 18% tax rate.

Around  eight sectors – textiles, fertiliser, renewable energy, automotive, handicrafts, agriculture, health and insurance – will benefit the most from the GST rate overhaul as per the government’s latest proposal on GST reform.

In addition to that, the revamped GST is expected to give a big boost to consumption, offsetting the revenue loss that may occur from the rate revision.

Additionally, the special rate of 40% would be levied on only about 7 items. Tobacco will also fall under this rate but the total incidence of taxation would continue at the current 88%. Besides these, online gaming is also likely to be treated as a demerit goods category and attract the highest tax rate.

How is the Current GST Structure?

Under the current GST structure, that came into effect after central and state levies were subsumed from July 1, 2017, the highest 65% tax collections happen from the 18% levy. The top tax bracket of 28% on luxury and sin goods contributes 11% of the revenue. Meanwhithe 12% slab accounts for just 5 per cent of the revenue.

On the other hand, the lowest levy of 5% on essential daily-use items contributes 7% of the total GST kitty.

In case of the high labour-intensive and export-orientated sectors like diamonds and precious stones, the levies would continue to be as per the existing rates.

As per the PTI report, the rate changes could not have happened now, as the compensation cess, which is levied on luxury and demerit goods was coming to an end once the repayment of the borrowed loans is complete.

Additionally, multiple GST rates in the supply chain were leading to evasion as fraudsters were generating fake invoices to claim input tax credit.

Under the GST law, a maximum of 40% tax can be levied on goods and services.

Gross GST collection increased 7.5% to about ₹1.96 lakh crore in July 2025, on higher domestic revenues. The gross domestic revenue grew 6.7% to ₹1.43 lakh crore, while tax from imports rose 9.5% to ₹52,712 crore. On the other hand, GST refunds shot up 66.8% year-on-year to ₹27,147 crore.