“Double–Diwali” Next-Generation GST reforms: Check Here the Centre’s Proposal for Reforms of GST

On the 79th Independence Day, Prime Minister Narendra Modi in his 12th consecutive Independence Day speech at the Red Fort, addressed the nation by announcing major tax reforms, calling them a “double Diwali” for citizens. The reforms of Next-Generation GST  aim to simplify the Goods and Services Tax (GST), reduce taxes on essential goods, and make the income tax system more transparent and efficient. These measures are designed to directly benefit the common man, stimulate economic activity, and provide relief to middle-class taxpayers.

Addressing the nation on Independence Day. https://t.co/rsFUG7q6eP

— Narendra Modi (@narendramodi) August 15, 2025

During the speech delivery on 79th Independence Day at the Red Fort, PM Modi addressed, “This Diwali, I am going to make it a double Diwali for you... Over the past eight years, we have undertaken a major reform in GST... We are bringing next-generation GST reforms. This will reduce the tax burden across the country.”

What are the Next-Generation GST reforms?

This year at the 79th Independence Day, during the speech delivered of PM Modi, he announced to give double Diwali in the form of Next-Generation GST reforms. These reforms are designed to make the tax system more citizen-friendly by lowering taxes on essential goods and services. The GST reforms are expected to directly reduce the financial burden on households and encourage consumption, which can stimulate economic activity across sectors.

Prime Minister Shri @narendramodi, on the occasion of 79th Independence Day, highlighted how Goods and Services Tax (GST), implemented in 2017, is a significant reform which has benefited the nation.

The Prime Minister underscored the importance of the next generation of reforms…

— Ministry of Finance (@FinMinIndia) August 15, 2025

The Prime Minister emphasised the significance of the upcoming reforms in the Goods and Services Tax (GST), aimed at providing tangible benefits to citizens, farmers, the middle class, and Micro, Small, and Medium Enterprises (MSMEs). These reforms are designed to strengthen the vision of an Atmanirbhar Bharat by simplifying taxation and making it more equitable.

The proposed GST reforms will focus on three main pillars:
1. Structural Reforms
2.  Rate Rationalisation
3.  Ease of Living

The Central Government has submitted its recommendations on GST rate rationalisation and broader reforms to the Group of Ministers (GoM) formed by the GST Council. The goal is to streamline the tax system, reduce disputes, and ensure benefits reach all sections of society, including women, students, farmers, and the middle class.

What are the areas of Next-Generation GST Reforms?

Areas of Next-Generation GST Reforms: 

• Rationalising tax rates to make essential and aspirational goods more affordable.

• Resolving classification issues to reduce disputes and simplify compliance.

• Correcting inverted duty structures in specific sectors to promote domestic production.

• Providing long-term clarity and stability in GST rates to support business planning and economic growth.

What are the pillars of the Centre’s Proposed Reforms?

Pillar 1: Structural Reforms

• Inverted Duty Structure Correction: Aligning input and output tax rates to reduce accumulated input tax credits, boosting domestic value addition.

• Resolving Classification Issues: Streamlining rate structures to reduce disputes, simplify compliance, and ensure fairness across sectors.

• Stability and Predictability: Offering clear, long-term guidance on rates and policies to build confidence among businesses.

Pillar 2: Rate Rationalisation

• Lower Taxes on Common and Aspirational Goods: Making essential items more affordable and encouraging consumption.

• Simplifying Tax Slabs: Moving towards a simpler structure with two main slabs – standard and merit – with special rates only for select items.

• Fiscal Flexibility: The removal of compensation cess provides room to rationalise and align GST rates sustainably.

Pillar 3: Ease of Living

• Seamless Registration: Technology-driven and time-bound registration for small businesses and startups.

• Simplified Returns: Pre-filled returns to reduce manual intervention and avoid mismatches.

• Faster Refunds: Automated processing for exporters and sectors affected by inverted duty structures.

The Centre’s proposals, built on these three pillars, have been shared with the GoM for discussion. The government aims to foster an inclusive, consensus-based dialogue with states, ensuring cooperative federalism in the implementation process.

The GST Council will review the GoM’s recommendations in its next meeting, with efforts to ensure early implementation so that the benefits reach citizens and businesses within the current financial year.

The government remains committed to evolving GST into a simple, stable, and transparent system that promotes inclusive growth, strengthens the formal economy, and enhances the Ease of Doing Business (EoDB) across India.

How is income tax being reformed?

In addition to GST reforms, the government is reforming income tax with a focus on transparency and efficiency. The faceless assessment system is being expanded to ensure that taxpayers have a smooth and hassle-free experience.

Key Highlights:

• Zero tax for annual income up to ₹12 lakh: A significant relief for middle-class earners, making taxation simpler and fairer.

• Simplified GST compliance: Businesses and individuals will find it easier to file returns and calculate taxes.

• Enhanced transparency and efficiency: Faceless assessment reduces human intervention, minimising errors and delays.

Why are these tax reforms significant?

These tax reforms reflect the government’s commitment to making taxation more accessible and equitable.  These reductions of tax burden in GST reform will be implemented by Diwali in 2025, and the committee will be set up to make more refinements and strengthen the Indian economy. By reducing the tax burden on essential goods and middle-class incomes, the initiative is expected to strengthen consumer confidence, stimulate economic activity, and enhance overall ease of doing business in India.