Prime Minister Narendra Modi, during his Independence Day address from the Red Fort, announced a comprehensive overhaul of the Goods and Services Tax (GST), promising a “next-generation” reform with significantly lower rates to be implemented this Diwali. He described it as a major festive gift for the nation.

“Over the past eight years, we have implemented significant GST reforms and simplified the tax structure. Now, after careful review and consultations with states, we are ready to introduce the next-generation GST reform as a Diwali gift,” PM Modi stated.

Currently, GST in India is levied across five main slabs, ranging from 0% to 28%, with 12% and 18% serving as the standard rates for most goods and services. Roughly 21% of items fall under the 5% bracket, 19% under 12%, and 44% under 18%.

Sources indicate that the government is considering removing the 12% slab and redistributing those goods between the 5% and 18% categories, although the final details are still being worked out.

“This reform will significantly reduce taxes on essential goods and services, benefit MSMEs, make daily-use products more affordable, and give a boost to economic growth,” the Prime Minister said.

The proposed “next-generation GST” is expected to strengthen consumption, support households, and inject fresh momentum into India’s economy, especially in light of recent international trade uncertainties.

Economists note that while lower rates could temporarily reduce government revenue, higher sales volumes and better compliance under a simplified tax system are likely to offset these losses over time. The move responds to long-standing demands for reduced GST rates to ease the financial burden on both consumers and businesses.