Finance Minister Nirmala Sitharaman cites affordability and self-reliance as guiding principles
The Goods and Services Tax (GST), India’s biggest indirect tax reform since 2017, has evolved into the backbone of the tax framework. At its 56th meeting, chaired by Finance Minister (FM) Nirmala Sitharaman, the GST Council approved Next-Gen reforms in the indirect tax structure, aligning it with Prime Minister Narendra Modi’s Independence Day promise of a “Diwali gift” for the people.
The package introduces a simplified two-slab structure (5% and 18%), leading to sweeping tax cuts benefiting households, farmers, MSMEs, and key sectors such as health and agriculture. Effective 22 September 2025, the latest reforms aim to ease compliance, lower tax burdens, and spur growth.
GST Revamp Marks Completion of Major Taxation Reform Goals
In a recent interview (Sept 6) with the Economic Times (ET), Finance Minister Nirmala Sitharaman said the revamped GST marks a major taxation reform and is set to boost India’s economy. These reforms, she noted, fulfilled a major taxation reform goal.
Boost Growth, Spur Consumption
The GST revamp will positively impact India’s economy and growth, as it affects all 1.4 billion citizens. From household essentials to vehicles, every purchase comes under GST, making the reform significant for daily life and overall economic activity. This comprehensive coverage ensures widespread benefits and a direct boost to growth.
Relief for the export sector
She added that the government was working on support measures for tariff-affected sectors, with specific steps for textiles likely to be announced soon. US President Donald Trump imposed a 50% tariff on imports from India, including a 25% penal tariff in lieu of New Delhi’s oil purchases from India.
GST Reforms: Not a Response to US Tariffs
The government maintains that GST reforms were not in response to the higher US tariffs on Indian goods but part of a long-planned tax overhaul. The discussions on rate rationalisation had been underway for 1.5 years. Still, alongside RBI rate cuts and personal income tax relief, the reforms could help cushion tariff impacts and support economic growth.
Key Principles Driving GST Changes
The GST rate revisions prioritise daily-use items for the poor and middle class, essential goods for farmers, and key sectors vital to India’s economy and Aatmanirbharta. MSMEs’ raw materials and processes were also considered, ensuring the new rates support both social welfare and economic growth while reflecting strategic priorities.
Industry Response to GST Overhaul
The government said several industries have committed to passing on GST rate cuts to consumers. Public sector insurance companies confirmed they will do so, while a major auto company announced reductions on specific cars and passenger vehicles. Many companies, she added, are publicly declaring their plans to extend the tax-cut benefits directly to customers.
Addressing industry concerns over the September 22 rollout, the FM said periodic clarifications will be issued to ease the transition. She added that in consultations, nearly all sectors showed willingness to cooperate, as the reforms are ultimately aimed at benefiting people.
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