PM Modi's Diwali Gift To Indians - GST Reforms

Prime Minister Narendra Modi on Thursday announced that there will be reforms in the GST (Goods and Services Tax).

In his Independence Day Speech from the Red Fort, he said, "This Diwali, I am going to make it a double Diwali for you... Over the past eight years, we have undertaken a major reform in GST... We are bringing next-generation GST reforms. This will reduce the tax burden across the country."

Narendra Modi announced that planned reforms to the Goods and Services Tax (GST) system will make everyday items cheaper, benefiting both consumers and small businesses. He made the comments just weeks before the 56th GST Council meeting, where major decisions on rate rationalization are expected.

The announcement aligns with a current proposal to simplify GST by eliminating the 12% tax bracket and reassigning items to either the 5% or 18% categories. If approved, these changes would be the most significant consumer-focused reforms to the GST since its introduction in 2017.

The GST is a unified, multi-stage, consumption-based tax that replaced a range of indirect taxes in India, such as VAT and excise duties. Implemented on July 1, 2017, the system uses five primary tax brackets-0%, 5%, 12%, 18%, and 28%-for goods and services. However, some items like petroleum products, alcohol, and electricity are taxed separately by state governments. Special rates also apply to precious stones (0.25%), gold (3%), and certain luxury goods and tobacco, which have an additional cess on top of the 28% rate.