The Indian government is implementing a renewed tax reform aimed at alleviating the financial burden on everyday citizens and boosting consumer spending.
Finance Minister Nirmala Sitharaman, speaking at the Outreach and Interaction Program on Next Gen GST Reforms in Visakhapatnam, highlighted how the restructured Goods and Services Tax (GST) system is expected to inject Rs 2 lakh crore into the hands of the public. "With this New Gen Tax regime, with only two slabs (5 per cent and 18 per cent), Rs 2 lakh crore is injected into the economy. People will have cash on hand," she said, according to a PTI report. As part of the GST 2.0 initiative launching on September 22, the new structure will simplify the current multi-tiered system. The previously existing 12 per cent and 28 per cent GST slabs will be removed entirely. In their place, a dual-slab system will emerge, 5 per cent for commonly used goods and 18 per cent for everything else. Additionally, 'sin goods' and some luxury goods are kept in a 40 per cent slab. This realignment will especially benefit the middle class and lower-income groups, with 99 per cent of essential goods that contribute to just 12 per cent of the revenue now falling under the 5 per cent bracket. Daily essentials such as bread, milk, and paneer will be exempt from GST altogether. “The benefits provided to various industries in the country will be tenfold greater for the public with these next-gen GST reforms,” said Sitharaman. From Rs 7.19 Lakh Crore To Rs 22.08 Lakh Crore In GST Revenues The minister also shared that GST revenues have surged significantly, from Rs 7.19 lakh crore in 2018 to a projected Rs 22.08 lakh crore by 2025. Alongside this revenue boom, the number of registered taxpayers has more than doubled, from 65 lakh to 1.51 crore. This data reflects the growing compliance and expanding tax base under the GST regime, driven by increased transparency and streamlined tax filing systems. More Cash, More Choices Combined with the income tax relief announced in the 2025 Union Budget, the revamped GST system is designed to leave more disposable income in the hands of citizens. With reduced taxes on daily essentials and simplified slabs, the reform could lead to an uptick in discretionary spending, which in turn is expected to boost overall economic activity. Sitharaman stressed that the reforms were undertaken “with a focus on the common man,” signalling a clear intent to make taxation more equitable and less burdensome.
