GST 2.0 Incoming? CII Pushes for Major Overhaul to Ease Common Man’s Burden

As India completes eight years of its Goods and Services Tax (GST) regime, a strong push for its transformation is now coming from one of the country’s most influential industry bodies. The Confederation of Indian Industry (CII) has called for a major overhaul of the GST framework, making a compelling case for relief to middle- and low-income households, inclusion of key sectors like petroleum under GST, and a simplification of the tax slab structure.

In what could be a defining shift in India’s indirect tax system—if accepted by the GST Council—these recommendations are expected to be taken up in the upcoming July GST Council meeting, potentially paving the way for GST 2.0.

GST 2.0: What Is Being Proposed?

At the heart of the proposal lies one strong message: simplify the system and make it equitable.

CII President Rajiv Memani has urged the government to restructure GST rates in a way that supports consumption by the common man while still ensuring that luxury and sin goods are taxed appropriately.

“Essential and daily-use items should not attract more than 5% GST. The 12% and 18% slabs should be merged for simplicity. It’s time we move to GST 2.0,” said Memani.

Here’s what CII is proposing:

• Merge the 12% and 18% slabs into a single rate to reduce tax compliance burdens.

• Ensure items used by the bottom 20-30% of the population are taxed at no more than 5%.

• Continue taxing luxury and sin goods at 28%, maintaining fiscal prudence.

Petroleum and Electricity Under GST? A Game-Changer in the Making

One of the most significant and bold recommendations from CII is to bring petroleum and electricity under the GST net—a long-standing demand from businesses and consumers alike.

Currently, petroleum products are excluded from GST, and states levy VAT while the Centre imposes excise duties. This leads to price disparities across states and affects the efficiency of logistics and supply chains.

“This is not a technical or legal issue—it’s about political consensus,” Memani said, highlighting that the Centre is open to the idea, but state-level agreement is the missing link.

What Will Change If Petroleum Comes Under GST?

• Uniform pricing across states for fuel.

• Elimination of cascading taxes, leading to lower final prices.

• Enhanced supply chain efficiency, especially for sectors dependent on fuel and energy.

To make this transition smooth and viable for states, CII suggests:

1. Guaranteed revenue protection for states to prevent fiscal loss.

2. State-wise petroleum consumption data to calculate fair compensation.

3. Revenue forecasting models to ensure long-term sustainability.

Cement is Essential, Not a Luxury

CII has also batted for reducing GST on cement from the current 28%, calling it a vital input for affordable housing and infrastructure, and not a luxury item.

Memani argued that such high tax rates discourage infrastructure development, which is a key engine of India’s economic growth.

If CII’s proposals—and government deliberations—bear fruit, Indian households could soon witness a significant price drop in commonly used items, especially those currently taxed at 12%.

According to sources, the government is seriously considering merging or eliminating the 12% slab, which could shift several everyday goods to the 5% tax bracket.

Products That Could Become Cheaper:

• Footwear, soaps, toothpaste

• Sweets, packaged juices, jam

• Clothes, umbrellas, hats

• Bicycles, wooden furniture, pencils

• Dairy products like paneer, dates, dry fruits

• Namkeen, pasta, jute and cotton handbags

Such a shift could bring direct relief to middle- and lower-income consumers, improving affordability and boosting demand.

All Eyes on July GST Council Meet

The GST Council is expected to meet in July, and if these proposals are accepted, it could mark a historic reform moment in India’s tax journey. The shift towards a consumption-friendly and simplified tax structure will be crucial, especially in the context of India’s aspirations to be a $5 trillion economy.

• Implemented: July 1, 2017

• Current Slabs: 5%, 12%, 18%, 28%

• Deciding Authority: GST Council, with representation from Centre and states

• Criticisms: Complexity, multiple slabs, exclusion of key sectors like fuel and electricity

• Reform Demand: Stronger now than ever, with GST 2.0 on the horizon

Why This Matters

In a country where indirect taxes affect every household, every purchase, and every supply chain, a more rational and consumption-aligned GST system can:

• Improve compliance,

• Spur growth,

• Encourage investments, and

• Most importantly, ease the financial pressure on the common citizen.

With the groundwork laid by CII and the momentum building within policy circles, the next GST Council meeting could shape the future of how India is taxed—and how fairly.