Summary: The Indian government has proposed significant Goods and Services Tax (GST) reforms to be implemented by October 2025, which would streamline the tax structure and potentially benefit taxpayers. The plan is to reduce the current GST slabs to just two primary rates: 5% and 18%, by merging the 12% and 28% rates. These reforms are based on three pillars: structural reforms to correct inverted duty structures, rate rationalization to simplify the system, and ease of living through tech-driven solutions. While removing the 12% and 28% rates might initially cause some revenue loss, the government anticipates that lower rates could increase consumption and reduce tax evasion, leading to a potential increase in revenue. For taxpayers, this could result in reduced prices for many daily-use products and even some luxury goods, making them more affordable and increasing purchasing power. Taxpayers should note that these are still proposals and are subject to final approval by the GST Council.
Arjuna (Fictional Character): Krishna, Government proposed some GST reforms to be implemented by October 2025, aiming to reduced taxes on daily-use products and benefits to taxpayers.
Krishna (Fictional Character): Arjuna, Government has proposed to reduce the number of slabs under the Goods and Services Tax system by merging GST slabs and lowering rates on selected goods and keeping only 5% and 18% GST rate. These reforms would be part of a “Diwali gift” from the Government in the form of the “next-generation GST reforms” to the taxpayer.
Arjuna (Fictional Character): Krishna, what are the proposed changes in the GST structure?
Krishna (Fictional Character): Arjuna, the reforms focus on three pillars:
1.Structural Reforms:
- Correcting inverted duty structures so input tax credits don’t pile up unnecessarily.
- Resolving classification issues to reduce disputes.
- Giving businesses long-term clarity for stability and predictability.
2. Rate Rationalisation:
- Simplifying slabs by phasing out the 12% and 28% rates.
- Reducing taxes on daily-use products and aspirational goods.
3. Ease of Living:
- Seamless, tech-driven registration for small businesses.
- Pre-filled GST returns to cut manual work.
- Faster, automated refunds for exporters and those affected by inverted duty structures.
Arjuna (Fictional Character): Krishna, the proposed changes to GST slabs will impact government revenue?
Krishna (Fictional Character): Arjuna, removing the 12% and 28% rates may cause some revenue loss, but it may not be so huge as to materially affect the fiscal deficit. The thinking is that the lower rates may increase consumption, reduce evasion, and may increase revenues by the end of the financial year.
Arjuna (Fictional Character): Krishna, what government is planning with this proposed change in GST?
Krishna (Fictional Character): Arjuna, the government’s idea is to reduce taxes on daily use product and luxury goods. This means that essentials like food and household products, along with items such as soaps, shampoos, and even appliances, may become more affordable. For the common man, it may ease the cost of living and increase purchasing power.
The proposal also aims to simplify the tax structure by moving to just two tax rates, while keeping special rates only for a few selected goods. This may make GST easier to understand and more transparent, both for consumers and businesses.
Arjuna (Fictional Character): Krishna, how this proposed change will impact to taxpayer?
Krishna (Fictional Character): The impact to the taxpayer due to this proposed changes may be as for example the 28% rate on luxury items like air conditioners is likely to be reduced to 18% category which may increase the purchasing power of the taxpayer, while many daily use products are currently in the 12% category, such as toothpaste, soap, and shampoo, may also shift to a lower rate. This may make essential and commonly used items cheaper for the people.
Arjuna (Fictional Character): Krishna, what should we learn from this?
Krishna (Fictional Character): Arjuna, due to proposed change in GST rate structure, the rates of many goods may decrease. But businessman should analyse the difference of rate on goods traded by him and work accordingly. Also, the consumers of goods should try to understand the effect on goods that are consumed by them. The taxpayer should see these reforms as a step toward affordability, transparency, and a more people-friendly tax system. Taxpayer should remember that this is currently just a proposal and they must wait for the final amendments and approval by the GST Council and government before implementation.
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