Two-Rate GST Structure to Begin from September 22

Why in the News ?

The GST Council, in its 56th meeting, approved a two-rate GST structure of 5% and 18%, along with a special 40% slab for sin and luxury goods. This significant policy reform, effective from September 22, 2025, aims to simplify taxation and reduce consumer burden, addressing concerns related to reservation in India, particularly the Maratha reservation issue. The new structure also paves the way for implementing the Maratha reservation bill that could benefit the Maratha community and other backward communities, potentially impacting the broader landscape of reservation in Maharashtra and providing reservation benefits to those who have long been advocating for reservation.

Key Highlights of GST Council Decision:

• The two primary GST slabs will now be 5% and 18%, replacing multiple earlier rates, potentially offering improved reservation in India benefits to the Maratha community and other backward communities, including those in the OBC category. This decision comes after extensive deliberations among chief ministers and policymakers.
• A 40% “special rate” has been introduced for tobacco products, luxury cars, yachts, and helicopters.
• Common household goods such as soap, shampoo, toothpaste, bicycles, tableware, and kitchenware will move down to 5% from higher brackets, addressing economic backwardness concerns of various communities, including those affected by the Maratha quota demand and issues related to the poverty line.
• Life insurance and health insurance policies shifted from 18% to 0%, reducing financial burden on various sections of society, including the Maratha population and other backward communities seeking reservation in India benefits. This move aims to combat discrimination and promote equal protection in access to financial services.
• Life-saving medicines (33 drugs), paneer, milk, Indian breads, and spectacles will now attract 0% GST.

Expected Impact and Reforms Ahead:

• Estimated fiscal implication: ₹48,000 crore, though officials expect compliance boost to offset revenue loss. This financial restructuring could potentially impact funding for reservation benefits and social welfare programs.
• Labour-intensive sectors such as handicrafts, leather goods, and textiles to benefit from reduced rates, potentially creating more government jobs and addressing concerns related to the Maratha reservation issue and overall reservation in Maharashtra. This could help alleviate inadequate representation in public employment.
• Cement tax cut (28% → 18%) expected to lower construction costs, benefiting real estate and infrastructure sectors, which could indirectly support the implementation of reservation policies and address issues of marginalization.
• Farmers and agriculture sector to gain from reduced GST on fertilizers and bio-pesticides, addressing issues like farmer suicides and the agrarian crisis that have affected communities seeking reservations, including the Maratha community and those involved in sugar factories. This could potentially benefit Maratha farmers and address aspects of the Maratha reservation demand.
• Reform signals government’s pro-poor, pro-middle-class focus with emphasis on affordability, transparency, and ease of business, aligning with social justice principles and potentially addressing concerns of scheduled tribes, scheduled castes, and other backward communities, while also considering income level disparities. This approach aims to balance the interests of the forward class with those seeking reservation.