Prime Minister Narendra Modi, in his Independence Day address from the Red Fort on August 15, 2025, unveiled a major initiative dubbed a “Diwali gift” for citizens—“next-generation GST reforms” designed to lower tax burdens, simplify structures, and deliver economic relief across the country.
What the “Next-Generation” GST Reforms Entail
- The reforms aim to streamline GST slabs, potentially merging or rationalizing existing rates to reduce complexity and rates on everyday items.
- Goods like packaged food, beverages, apparel, and hotel services—currently taxed at 12%—may be reclassified into the 5% or 18% slabs, effectively lowering bills for middle-income consumers.
- The Group of Ministers (GoM), including state representatives, is formulating proposals focused on rate rationalization, structural change, and easing tax compliance.
- If approved, the changes would reduce revenue by an estimated ₹50,000 crore (~0.15% of GDP) but could boost consumer spending and stimulus to households by 0.6%–0.7% of GDP.Reuters
Why This Matters
| Impact Area | Details |
|---|---|
| Relief for Consumers | Lowered GST rates on daily-use items ease financial strain on households and boost demand. |
| Support for MSMEs | Simplified compliance and reduced taxes will strengthen small and medium enterprises. |
| Tax System Overhaul | The reform signals a modernization of GST to fit the needs of the 21st-century economy. |
| Boost to Economy | Lower taxes combined with consumption uplift may offer substantial economic stimulation. |
