New Delhi, August 15, 2025 – In his Independence Day address, Prime Minister Narendra Modi announced a bold overhaul of India’s Goods and Services Tax (GST), promising sweeping relief for consumers, micro and small businesses, and general economic momentum in the coming festivals.
Describing the reform as a “double Diwali gift,” PM Modi unveiled plans to simplify India’s multi-tiered GST system into a leaner, two-slab framework to be rolled out by October. The “GST 2.0” overhaul is expected to boost affordability, streamline compliance, and stimulate domestic demand.
A Simpler, Fairer Tax System
Currently, GST applies four main rates—5%, 12%, 18%, and 28%—plus additional levies on luxury and demerit goods. Under the new blueprint:
- Most items now taxed at 12% will be moved to 5%.
- The majority of those in the 28% bracket will shift to 18%.
- A 40% rate may be reserved for a narrow category of luxury or harmful items.
The Finance Ministry’s proposal spotlights simplicity without sacrificing necessary structure—introducing just two main tax slabs (“standard” and “merit”) and applying special rates only on select items.The Economic TimesmintGST LearnThe Times of India
Why It Matters: Relief, Growth, and Ease
For Consumers
Everyday essentials—from food and medicines to home appliances—will become more affordable, especially as items like packaged food, butter, and beverages shift into lower rate categories.
For Small Businesses and MSMEs
Simplified slabs and streamlined compliance promise to reduce administrative burden and boost competitiveness—especially helpful for micro and small enterprises.
For the Economy
Experts say GST 2.0 is a strategically timed move, likely to invigorate consumption, improve ease of doing business, and fortify the economy in uncertain global conditions. The Confederation of Indian Industry hailed the reform as “visionary,” expecting it to drive clarity and boost market efficiencies.The Times of India
Groundwork & Governance
The government has submitted its reform blueprint to a Group of Ministers (GoM), and formal discussions are expected to play out in upcoming sessions of the GST Council, where state finance ministers and the central Finance Ministry collaborate. This cooperative approach is key to ensuring timely implementation before Diwali.www.ndtv.comThe New Indian Express
Balancing Sacrifice and Benefit
While rate cuts could lower government revenue—projections estimate a potential loss around ₹500 billion (0.15% of GDP)—this loss could be counterbalanced by higher consumption and an estimated policy stimulus reaching up to 0.7% of GDP in the 2025–26 financial year.Reuters+1
