In December 2024, Prime Minister Narendra Modi made a subtle but impactful suggestion to Finance Minister Nirmala Sitharaman, saying, “Ek baar aap GST dekh lo” (“Take another look at GST”). This nudge prompted the government to undertake the most significant reform of the Goods and Services Tax (GST) system in nearly eight years. The focus was on simplifying the tax structure and easing compliance, especially for small and medium-sized enterprises (SMEs), which often faced complex procedures and high tax burdens.
The reforms, finalized by the GST Council in early September 2025, introduced a streamlined tax system with just two slabs—5% and 18%—instead of the previous four. This move led to tax cuts of up to 10 percentage points on approximately 400 items, including essential goods like shampoos, toothpaste, hybrid cars, and consumer electronics. Additionally, life-saving medicines and insurance premiums were entirely exempted from GST, effective from September 22, 2025. These changes were designed to reduce everyday costs for households and encourage spending.
Finance Minister Sitharaman described the reforms as a “people’s reform,” emphasizing that the new tax structure would benefit all sections of society by lowering expenses and boosting consumption. The government also launched a nationwide campaign to educate citizens and businesses about the updated GST framework and its benefits, ensuring that the reforms reach every corner of the country.
The new GST structure is expected to stimulate domestic demand, particularly in sectors like FMCG, automobiles, and electronics. Analysts believe this reform will support the government’s broader economic objectives of promoting inclusive growth, enhancing ease of doing business, and fostering a more consumer-driven economy. With these changes, the government aims to address long-standing concerns and build trust among taxpayers while laying the foundation for sustained economic development.
