PM Modi announced plans for GST reforms during his Independence Day address, including a reduction in tax rates by Diwali. This could lead to significant changes in the current tax structure.
Prime Minister Narendra Modi, during his 79th Independence Day address on Friday from the ramparts of the iconic Red Fort, promised a 'double Diwali' this year. He announced major reforms in the Goods and Services Tax (GST) and a reduction in tax rates by October.
Vowing to reform and lower tax rates by Diwali, PM Modi 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, " DD News quoted the PM as saying during his Independence Day speech.
With the major Hindu festival of lights - Diwali just a few months away - this announcement comes as the government prepares to simplify the GST structure.
From merging tax slabs to lowering rates on some products, the government has previously expressed its intent to reduce the number of tax brackets and revise GST rates.
Currently, the effective GST rates are 5%, 12%, 18% and 28% on most goods and services, excluding gold and silver. On demerit items such as cigarettes and high-end cars, the government applies additional taxes.
According to the brokerage Citi, around 20% of items - including packaged food and beverages, apparel and hotel accommodation - fall under the 12% GST slab, accounting for 5-10% of consumption and 5-6% of GST revenue.
"If most of these are moved to the 5% slab and some to the 18% slab, it could lead to a revenue loss of around 500 billion rupees, or 0.15% of GDP, potentially taking the total policy stimulus for households in the current 2025-26 financial year to 0.6%-0.7% of GDP, " Citi noted.
PM Modi greets the nation
Before heading to the Red Fort for his 12th address, PM Modi greeted the nation through a social media post on X.
Urging the citizens to work harder to build a developed Bharat, he wrote, "Wishing everyone a very happy Independence Day. May this day inspire us to keep working even harder to realise the dreams of our freedom fighters and build a Viksit Bharat. Jai Hind."
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