In a significant policy announcement during his Independence Day address, Prime Minister Narendra Modi revealed that the government is preparing to roll out “next-generation GST reforms” aimed at easing the tax burden for millions of Indians. The reforms, which could take effect by Diwali 2025, are expected to simplify the Goods and Services Tax (GST) structure and make essential goods and services more affordable for consumers.
While full details are yet to be officially released, sources familiar with the matter said the government is considering a reduction in the number of GST slabs to just three — 5%, 18%, and a new 40% slab for sin goods.
Lower Taxes on Essentials, Big Relief for Households
As per early indications, most goods currently taxed at 12% are likely to be moved to the 5% slab. These include a wide range of everyday items such as condensed milk, frozen vegetables, namkeens like bhujiya, pasta, jams, tooth powder, feeding bottles, umbrellas, furniture, bicycles, utensils, and jute or cotton handbags.
Footwear priced under ₹1,000 and stationery items like pencils could also become cheaper under the revised structure.
On the higher end, items currently under the 28% slab, such as televisions, washing machines, and similar appliances, are expected to move to the 18% bracket — making durable goods significantly more accessible to middle-class consumers.
Additionally, agricultural equipment, basic insurance, and education services are among those expected to benefit from the lower 5% rate, potentially boosting consumption and easing financial pressure on farmers and families alike.
Sin Goods to Face Higher Tax
To balance the reduced revenue from lower GST slabs, the government is proposing the introduction of a 40% tax slab for “sin goods” — products deemed harmful to health or society. This would include items such as tobacco, cigarettes, and alcoholic beverages like beer.
GST Rationalisation Under Review
The Centre has submitted its reform proposals to the Group of Ministers on GST Rationalisation, which is reviewing the suggested changes. Once finalized, these recommendations will be presented to the GST Council, the apex decision-making body for indirect taxes, chaired by Union Finance Minister Nirmala Sitharaman and comprising finance ministers from all Indian states.
The GST Council holds the authority to approve, amend, or reject the proposals.
“Double Diwali” Promise
“We have consulted with the states and are now ready to implement GST reforms that will reduce the tax burden nationwide,” Prime Minister Modi said during his address. “This Diwali, I will bring you a special gift — a double Diwali — by lowering your everyday expenses.”
If approved and implemented as planned, the reforms would mark a major milestone in India’s indirect tax regime since the introduction of GST in 2017. It would also serve as a strong economic stimulus ahead of the festive season, by increasing purchasing power and boosting consumption across sectors.
