India’s next-generation GST (Goods and Services Tax) reforms, launched after the 56th GST Council meeting in September 2025, represent the most ambitious transformation of the nation’s indirect tax system since its original rollout in 2017. Announced by Finance Minister Nirmala Sitharaman and driven by Prime Minister Narendra Modi’s vision of an inclusive, growth-oriented economy, these reforms simplify the tax framework, reduce the burden on ordinary citizens, and catalyse consumption and sectoral expansion across the country.

From complexity to clarity: The road to GST

Before 2017, India’s tax architecture resembled a maze. Businesses navigated 17 central and state taxes, including Excise, VAT, and Service Tax, alongside 13 cesses, each with varying compliance portals and rules. This fragmented structure led to cascading taxes, restricted input credits, and inflated costs for both producers and consumers.

The GST rollout in July 2017 under the banner of “One Nation, One Tax” marked a structural leap. It replaced the patchwork of levies with a unified system, streamlined compliance, and allowed goods to move more freely across state borders. The reform improved logistics efficiency, reduced transport costs, and created a national marketplace. However, its four-tier rate structure (5%, 12%, 18%, 28%) and procedural bottlenecks still left room for improvement.

The 2025 reforms mark a second-generation leap: moving from simplification to optimisation.

Structural overhaul: Two main slabs

At the heart of the reform is the consolidation of four tax slabs into a two-slab system:

• 5% for essential, mass-consumption goods.

• 18% as the standard rate for most other items.

• 40% for luxury and demerit goods (tobacco, pan masala, gambling, high-end automobiles).

This rationalisation lightens the load on everyday consumption while concentrating revenue from luxury purchases and unhealthy........

© Mathrubhumi English