Upcoming GST Reforms in India: New Rates, Slabs and Key changes in 2025

On Independence Day, August 15, 2025, Prime Minister Narendra Modi announced a major push towards next-generation GST reforms, positioning it as a Diwali gift for the common man. The announcement has created buzz across industries, markets, and households, but it’s important to note that these changes are still at the proposal stage—they have not been implemented yet. Whether and how they will be rolled out depends on further discussions and approvals.

What Was Announced

In his Red Fort address, PM Modi declared that the government intends to simplify the current five-tier GST structure and reduce the tax burden on everyday essentials. The proposal for GST rationalisation has already been circulated to state governments, and the GST Council will be key in finalising the reforms.

According to reports, the suggested structure could look like this:

·       5% slab for essentials and daily-use goods

·       18% slab for most standard goods and services

·       A possible higher third slab for certain categories.

However, these details are based on draft proposals and media reports, and no final decision has been made yet.

Possible Economic Impacts

1. Boost to Consumption

Lower taxes on essentials and discretionary goods could increase disposable income, encouraging people to spend more. According to SBI Research, this may add nearly ₹1.98 lakh crore to consumption.

2. Inflation Relief

By reducing taxes on essentials, the reforms could ease inflationary pressure, making everyday living slightly more affordable.

3. Revenue Trade-Offs

The government may face possible annual revenue loss of thousands of crores, but this could be partly offset by cess collections on sin goods and higher compliance due to simplification.

4. Sectoral Benefits

If the proposed slabs are implemented, potential beneficiaries include:

·       Automobiles & two-wheelers: Maruti, Tata Motors, Hero MotoCorp

·       Cement & construction: Ultratech, ACC

·       FMCG companies: HUL, Nestlé, Britannia

·       White goods & electronics: Voltas, LG, Samsung, Whirlpool

·       Insurance sector: Lower GST on premiums could benefit insurers like LIC, HDFC Life, ICICI Prudencial.

While the announcement is bold and potentially transformative, it remains just that—an announcement. The real test lies in negotiation, approval, and execution. The GST Council’s upcoming sessions will determine whether this vision of a simpler, lighter GST becomes a reality or stays a promise.

For now, households and businesses can stay hopeful: if implemented, GST 2.0 could indeed be a Diwali bonanza, bringing relief to wallets and fueling India’s growth story.