Srinagar, Aug 15: India is set to undergo significant reforms in its Goods and Services Tax (GST) regime this year. Described as “next-generation” changes, these reforms are expected to be rolled out before Diwali, Prime Minister Narendra Modi announced on Independence Day. He assured that the new measures would lead to a substantial reduction in taxes on commonly used items, easing the financial burden on consumers.
The Centre has already prepared a three-pillar blueprint for these reforms, which has been sent to the Group of Ministers (GoM) for consultation. The final proposals are likely to be taken up in the upcoming meeting of the GST Council.
During his Independence Day address from the Red Fort, PM Modi framed the reforms as a “Diwali gift” for the public, promising relief through lower tax rates across the country. The GST system, which was implemented on July 1, 2017, has now completed eight years. The Prime Minister noted that it was time for a comprehensive review. A high-level committee was formed to assess the system and consult with states, paving the way for the proposed changes.
“These reforms will substantially reduce taxes on goods used by the common man,” said PM Modi. “Our MSMEs will benefit greatly, and the reduced cost of daily-use items will also help strengthen the overall economy.”
The proposed reforms are built around three key pillars: structural reforms, rate rationalisation, and ease of living. These align with the government’s broader vision of making India “atmanirbhar” (self-reliant) and aspiring to become the world’s third-largest economy.
The Centre has assured that it will make every effort to facilitate early implementation of the reforms. “The government reaffirms its commitment to evolving the GST into a simple, stable, and transparent tax system – one that supports inclusive growth, strengthens the formal economy, and enhances ease of doing business across the country,” the government said.
The first pillar, structural reforms, aims to address sector-specific issues such as the inverted duty structure, which currently causes imbalances in input and output tax rates. It also seeks to resolve classification disputes and bring stability and predictability to the GST framework.
The second pillar focuses on rate rationalisation. This involves reducing GST rates on essential and aspirational items, simplifying the rate structure, and gradually moving towards fewer tax slabs. The goal is to make the system more consistent and easier to navigate.
The third pillar, ease of living and compliance, is intended to simplify tax processes, particularly for startups and small businesses. Measures include the introduction of pre-filled returns, streamlined registration, and a faster refund mechanism, making GST compliance less burdensome.
According to the Finance Ministry, these reforms are rooted in cooperative federalism and are expected to strengthen key sectors of the economy. By correcting the inverted duty structure, the reforms aim to align input and output tax rates, reduce the accumulation of input tax credit, and encourage domestic value addition. Resolving classification issues will further simplify compliance, reduce disputes, and provide consistency across industries.
