The GST Council on Saturday approved the long-negotiated two-slab structure — a merit rate of 8 percent and a standard rate of 20 percent — effective October 1, replacing the 5, 12, 18 and 28 percent architecture that has defined the tax since 2017.
The compromise that unlocked eight years of deadlock: a compensation-linked surcharge on the narrow sin-and-luxury base, ring-fenced for five years and distributed on a formula that over-weights manufacturing states. Tamil Nadu and Karnataka, the loudest holdouts through 2025, voted with the majority; West Bengal recorded a dissent note but did not force a division.
The finance ministry's modelling, presented to the Council, projects a revenue-neutral first year with a 0.4 percent GDP efficiency gain by year three, driven by classification-dispute collapse — the two-rate structure eliminates an estimated 70 percent of pending rate-classification litigation by making most of it moot.
Consumer-facing effects will be uneven. Items at 12 percent — packaged foods, most textiles, hotel rooms under ₹7,500 — drop to 8. Items at 18 move to 20, a two-point rise the Council chose over a revenue hole. White goods and small cars exit the 28 bracket to 20, their first effective cut since 2018.
Industry reaction split predictably along that seam. What no one disputes is the administrative arithmetic: two rates, one return architecture, and — for the first time since GST began — a tax a small trader can compute without a consultant.
