As the 56th GST Council meeting draws closer on September 3-4, 2025, attention is focused on how the government plans to restructure GST rates on services, a move that could have wide-ranging implications for businesses and consumers alike.
According to sources, the Centre's proposed revamp aims to simplify GST by rationalising services currently spread across 12%, 18% and 28% slabs.
Key Changes Under Consideration
- Hotel tariffs: Rooms priced up to Rs 7,500 a night fall in the 12% slab, while costlier rooms attract 18%. These classifications could be revised for simplicity.
- Air travel: Economy and business classes are currently taxed differently, but rationalisation may be on the table.
- Banking services: Some may continue at 18%, as immediate changes here are considered difficult.
- Insurance premiums: Term and health insurance may see relief, while car and household insurance are likely to remain at 18%.
- Apartment maintenance: Calls have grown to reduce the 18% levy on housing society fees above Rs 7,500 per month.
- Luxury services: Casino entry and certain entertainment services could move to a higher 40% slab under the proposed overhaul.
The fitment committee of state ministers and finance secretaries is meeting from Tuesday in New Delhi to iron out these details before the Council's formal deliberations. A large portion of services under the 12% bracket may shift to 5%, easing costs for the middle class.
Impact on the Festive Season
The uncertainty around GST rate cuts has created ripple effects across industries. With the festive season approaching, many consumers are holding back purchases in anticipation of lower prices. This coincides with the Shraddh period (Sept 7-22), considered inauspicious for big-ticket spending in several regions, further delaying sales.
Automobile companies have raised concerns over potential lost sales if there is a long gap between the GST Council's decisions and official notifications. They have urged the government to issue notifications quickly to avoid disruption during the festive shopping window.
Industry Preparations
Companies across FMCG, consumer durables, electronics, and automobiles are gearing up for a demand surge once rates are revised. To prepare:
- Firms are accelerating production cycles and adopting flexible dispatch schedules.
- Logistics providers are pre-positioning inventory closer to demand centres.
- Quick commerce platforms like Blinkit and Swiggy Instamart are setting up temporary dark stores in high-demand areas for faster last-mile delivery.
Automobile dealers, who have seen muted sales in recent months, expect a sharp rebound post-rate cut but caution that margins and input tax credit adjustments could present short-term financial strain.
Industry executives stress that agile supply chain planning and robust logistics execution will be critical to meeting compressed festive demand once GST reforms are implemented.
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