Good News For Taxpayers! PM Modi Announces Major GST Overhaul This Diwali: How It Will Impact You?

GST Reform Implementation: Eight years after the implementation of the Goods and Services Tax (GST), the indirect tax system will see a major overhaul this October before Diwali, Prime Minister Narendra Modi said while delivering the Independence Day speech at Red Fort on Friday, August 15.

PM Modi on Friday announced the introduction of a next-generation GST tax regime, which will significantly benefit the MSMEs and small businesses with its low rates. The next Gen GST is expected to be announced this Diwali. However, there is no confirmation about its implementation and other features in it.

GST Overhaul This Diwali: What It Means For Taxpayers?

As an indirect tax system, a potential reduction in GST slabs and rates would significantly lower taxes on goods and services. The central government has already consulted with states and may introduce a 'next-generation GST reform'.

With a potential reduction in GST rates, the taxes paid by citizens on daily items like sugar, tea, coffee, refrigerators, cars, etc, will reduce drastically. With this, the daily use products like milk, butter, edible oils, etc will become cheaper, emphasised PM Modi from the ramparts of Red Fort.

"I am going to give a great gift this Diwali. Over the past eight years, we implemented a major GST reform and simplified taxes. Now, the time has come for a review. We have conducted it, consulted with states, and are set to introduce a 'next-generation GST reform," said PM Modi in his Independence Day speech on Friday.

What GST Changes Are Expected?

To reduce GST rates on small business and daily use products, the central government is mulling over to eliminating the 12% slab and redistributing items that fall into the category between the 5% and 18% categories, reported India Today, citing sources. The 12% GST rate category includes processed foods and certain items like butter, cheese, ghee, packaged foods like frozen vegetables, etc.

With the implementation of New Gen GST, people can see a reduction in taxes imposed on these items. However, an official confirmation about the same is awaited. The proposed GST reform has been announced after a widespread backlash against the existing GST rates, where critics have pointed out how GST has impacted MSME businesses and the price of daily items.

Reduction in GST rates would help in boosting consumer spending and will also reduce the financial burden on households and businesses. Lower GST rate would also impact the government's GST collection and tax revenue. However, the record-high collection of GST over the past few months has provided room for the government to give some relaxation. Many experts have pointed out that GST rates reduction would also boost consumption and improve sales volume and may compensate for the reduction in tax collection.

PM Modi Independence Day Speech

Other than announcing GST reforms in 2025, PM Modi also announced that India will soon produce 'Made-In-India' semiconductor products. He said that six semiconductor units are already on the ground, and four new units have been given the green signal.

"By the end of this year, made in India, made by the people of India, made in India chips will come to the market," Modi said. Semiconductors, key components for any electronic device, have diverse applications ranging from mobile phones and computers to home appliances and electric vehicles. He also talked about multiple issues like Operation Sindoor, terrorism, geopolitical tensions, Indian economy, youth empowerment through employment, etc.