From the Red Fort on Independence Day, PM Modi unveiled plans for a landmark GST reform, set to simplify tax slabs, reduce costs on essentials, and boost domestic demand before Diwali.
New Delhi : From the ramparts of the Red Fort on Independence Day, Prime Minister Narendra Modi announced a landmark reform plan for India’s taxation system. The “Next Generation GST Reform,” set to be implemented before Diwali, is aimed at simplifying the tax structure while also reducing costs for the common man. Under the proposed overhaul, the existing five slabs of 0%, 5%, 12%, 18%, and 28% will be restructured by eliminating the 12% slab, redistributing goods and services into 5% and 18% categories. In addition, so-called “sin goods” such as tobacco and pan masala will attract a higher tax of 40%.
According to government sources, the reform also proposes tax relief for sectors like agricultural products, healthcare-related items, handicrafts, and insurance. This is expected to lower the cost of essential commodities, provide a boost to the MSME sector, and stimulate consumer demand. Health and life insurance premiums may also become cheaper, offering significant relief to middle-class families. While the government acknowledges that lower tax rates could temporarily reduce revenue, it is confident that higher consumption and improved tax compliance will offset the shortfall over the long term.
The GST Council is scheduled to meet for two days in the second week of September to finalize the structure of these reforms, with the rollout planned before Diwali. Politically, the move carries weight as well. At a time when global markets are rattled by U.S. President Donald Trump’s announcement of higher import tariffs, sparking fears of supply chain disruptions, Modi’s strategy is being viewed as a shield to protect India’s domestic economy. Strengthening the internal market through lower taxes and higher consumer spending is seen as a way to counter external shocks.
Recalling that GST was first launched on July 1, 2017, as a unified system replacing multiple state and central levies, the Prime Minister highlighted its success in simplifying processes and reducing the cost of doing business over the past eight years. “Now it is time to take that system to the next level,” Modi said, adding that the reform has been crafted after discussions with states. “This will be a major gift to the nation—benefiting ordinary citizens as well as small and medium enterprises.”
New Delhi : From the ramparts of the Red Fort on Independence Day, Prime Minister Narendra Modi announced a landmark reform plan for India’s taxation system. The “Next Generation GST Reform,” set to be implemented before Diwali, is aimed at simplifying the tax structure while also reducing costs for the common man. Under the proposed overhaul, the existing five slabs of 0%, 5%, 12%, 18%, and 28% will be restructured by eliminating the 12% slab, redistributing goods and services into 5% and 18% categories. In addition, so-called “sin goods” such as tobacco and pan masala will attract a higher tax of 40%.
According to government sources, the reform also proposes tax relief for sectors like agricultural products, healthcare-related items, handicrafts, and insurance. This is expected to lower the cost of essential commodities, provide a boost to the MSME sector, and stimulate consumer demand. Health and life insurance premiums may also become cheaper, offering significant relief to middle-class families. While the government acknowledges that lower tax rates could temporarily reduce revenue, it is confident that higher consumption and improved tax compliance will offset the shortfall over the long term.
The GST Council is scheduled to meet for two days in the second week of September to finalize the structure of these reforms, with the rollout planned before Diwali. Politically, the move carries weight as well. At a time when global markets are rattled by U.S. President Donald Trump’s announcement of higher import tariffs, sparking fears of supply chain disruptions, Modi’s strategy is being viewed as a shield to protect India’s domestic economy. Strengthening the internal market through lower taxes and higher consumer spending is seen as a way to counter external shocks.
Recalling that GST was first launched on July 1, 2017, as a unified system replacing multiple state and central levies, the Prime Minister highlighted its success in simplifying processes and reducing the cost of doing business over the past eight years. “Now it is time to take that system to the next level,” Modi said, adding that the reform has been crafted after discussions with states. “This will be a major gift to the nation—benefiting ordinary citizens as well as small and medium enterprises.”
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