India’s GST Reform: What to Know About the October Tax Cuts

India is preparing for a major shift in its Goods and Services Tax (GST) structure, with sweeping consumption tax cuts expected to take effect in October 2025. For businesses operating in India or selling into the Indian market, this reform presents both opportunities and challenges - especially around classification accuracy and compliance.  

What’s Changing in India’s GST Framework?  

The Indian government plans to simplify the current four-rate GST system into a two-rate structure: 5% and 18%, eliminating the 12% and 28% rates. Most goods currently taxed at 12% (including food items, personal care products, and household essentials) will shift to the 5% bracket.

Luxury and sin (aka disfavored) goods such as tobacco products, carbonated drinks, and high-end automobiles will be taxed at a special slab rate of 40%, preserving revenue from high-impact categories.

This reform is part of a broader economic stimulus strategy aimed at boosting domestic consumption and countering global trade pressures. While the reform may reduce government revenue by ₹1.1 trillion annually (0.3% of GDP), fiscal analysts consider the cost manageable, with offsetting factors such as surplus cess collections and higher-than-budgeted Reserve Bank of India (RBI) dividends

Why This Matters for Vertex Customers  

For companies using Vertex tax solutions, the transition will be supported by Vertex’s India-specific tax content, which includes:  

• SAC (Service Accounting Code) mapping: Vertex maintains detailed mappings that align with India’s GST requirements, ensuring accurate classification of services.
• HSN (Harmonized System of Nomenclature) coverage: Currently being enhanced to support the new rate structure.
• Automated tax determination: As rates shift, Vertex’s tax engine will automatically apply the correct GST rate.
• Regulatory monitoring and updates: Vertex’s content team tracks changes and ensures timely updates to tax rules, helping customers stay compliant without manual intervention.  

Preparing for the October Changes  

Businesses should consider the following steps to prepare:  

• Review product and service classifications to ensure HSN/SAC codes are correctly assigned.
• Monitor Vertex content updates for changes to GST rates and rules.  
• Engage with Vertex support or your implementation team to validate that your ERP or billing systems are ready for the new rate structure.  

Strategic Opportunity  

With the reform expected to reduce consumer prices and stimulate demand, businesses have a chance to optimize pricing strategies, expand product offerings, and enhance customer experience - all while staying compliant through Vertex’s automated tax solutions and VAT/GST compliance solutions.