On 15th August 2025, Prime Minister Narendra Modi, from the ramparts of the Red Fort, laid out the blueprint of a Next-Generation GST-an overhaul that would simplify the tax structure and put citizens at the centre of economic reform. After granting significant relief by exempting incomes up to ₹12 lakh, the government, through the GST Council, has approved sweeping changes to indirect taxation. By abolishing the 28 and 12 per cent slabs and streamlining the system into just two principal rates of 5 and 18 per cent, the reform delivers a cleaner, simpler, and fairer tax regime. For the common man, it means everyday essentials become cheaper, aspirations more affordable, and the promise of growth more inclusive. Backing this optimism, an SBI report projects that the reform will unlock a ₹1.98 lakh crore surge in consumption, giving a decisive push to India's growth story.
This is in sharp contrast to the pre-GST era, when India's tax system was fragmented and burdensome. Multiple taxes-state VATs, entry levies, excise duties, service tax-created a maze for businesses and consumers alike. Each state effectively operated as a separate market, undermining the very idea of economic unity. Cascading taxation meant that goods and services bore a tax-on-tax burden, inflating costs for the aam aadmi. The earlier governments often spoke of GST but could not build genuine consensus or lay down a workable roadmap. It was only under the Modi government, driven by the conviction of reforms by consensus, that the GST constitutional amendment was passed, ratified by states, and rolled out in July 2017.
Eight years on, the results are visible. GST has unified India into a single market. The taxpayer base has expanded from 66.5 lakh in 2017 to over 1.5 crore in 2025-evidence of the formalisation of the economy. Revenue collections tell an equally powerful story: gross GST collections have doubled in just four years, touching ₹22.08 lakh crore in FY 2024-25, growing at a CAGR of more than 18 per cent. The average monthly revenue now stands at ₹2,04,500 crore compared to just ₹82,000 crore in 2017-18. Far from being a burden, GST has become a pillar of economic confidence, reflecting improved compliance and the strength of the Indian economy.
The next-generation reforms announced this Independence Day are about moving from integration to optimisation. By simplifying the rate structure, correcting anomalies, and focusing on ease of compliance, the government has ensured that GST remains growth-oriented and citizen-centric. Instead of four main slabs, the new structure consolidates into two primary rates of 5 and 18 per cent, with only a few exceptions. Essentials such as paneer, milk, rotis, and parathas are now fully exempt. Medicines for cancer and rare diseases have been placed in the zero-tax category, while personal care items like soaps, shampoos, and toothpaste-everyday products for households-are down from 18 to 5 per cent. These are not abstract policy tweaks; they are direct interventions in household budgets.
For the middle class, mobility and housing become significantly more affordable. Two-wheelers, small cars, and three-wheelers-earlier taxed at 28 per cent-now fall under the 18 per cent slab. For a young professional, this translates into real savings. Cement, a crucial input for construction, sees its GST rate reduced from 28 to 18 per cent, lowering home-building costs and boosting affordable housing. For rural India, tractors, harvesters, and irrigation machinery are now taxed at 5 per cent, down from 12-18 per cent. This gives farmers better access to equipment, reduces input costs, and enhances productivity. Students too stand to gain, with exemptions on notebooks, pencils, maps, and erasers making education more affordable.
Healthcare, a major concern for families, is also at the core of this reform. Drugs across categories are now taxed lower, with several essential ones completely exempt. Medical oxygen, diagnostic kits, and thermometers-all indispensable during public health crises-are now at 5 per cent or less. By easing the cost of healthcare, the government has directly reduced one of the most pressing burdens on households.
The logic behind this rationalisation is sound. Lower taxes reduce costs, higher affordability increases demand, and stronger consumption drives production and job creation. In turn, the expanded tax base and higher compliance will keep revenues buoyant. This virtuous cycle is already evident. Despite periodic rate cuts in earlier years, collections have only grown stronger, not weaker. The fear that simplification would dent government finances has been disproven by hard data.
The sectoral impact of these reforms also deserves attention. Correcting inverted duty structures in fertilisers and textiles reduces dependence on imports and boosts domestic value addition. Lower rates for handicrafts strengthen rural livelihoods and promote India's cultural economy. Renewable energy equipment taxed lower aligns with India's COP commitments while spurring local manufacturing. Insurance at reduced rates supports the government's vision of "Insurance for All by 2047," deepening social security. These moves are not only about revenue efficiency but about aligning taxation with national priorities.
Alongside GST simplification, the government's parallel move on direct taxes has significantly boosted disposable incomes. A person earning ₹12 lakh annually now saves ₹1 lakh in taxes, and with the ₹75,000 standard deduction, the savings rise to ₹1.75 lakh. Someone earning ₹18 lakh benefits by ₹70,000, while those with incomes of ₹25 lakh save ₹1.10 lakh. Retirees too gain, as the deduction on savings has been doubled from ₹50,000 to ₹1 lakh, ensuring greater returns from deposits and other instruments. With middle-class households typically spending 80% of their additional disposable income, this relief alone is projected to inject nearly ₹5 lakh crore into the economy. Taken together with the GST-driven consumption boost, economists suggest India could see private consumption growth surge past 10%, lifting FY26 GDP expansion to over 8% compared to the earlier 6.3% forecast-securing India's place as the fastest-growing major economy.
The government also extended relief to businesses. Until 2019, corporates paid 25% tax up to ₹400 crore turnover and 30% beyond. The new regime cut this to 22% for those foregoing deductions, saving India's largest companies nearly ₹3 lakh crore-funds redirected to investment, growth, and jobs.
By ensuring both direct tax relief and rationalised indirect taxes, the government has empowered the common citizen to save more, spend more, and aspire more.
(The author is a national spokersperson of the BJP)
Disclaimer: These are the personal opinions of the author
