PM Modi Announces Historic GST Overhaul: Two-Slab Tax System to Boost Economy

Prime Minister Narendra Modi has announced a sweeping overhaul of the Goods and Services Tax (GST), calling it the biggest reform since the tax was launched in 2017. The new structure, being described as “GST 2.0”, will simplify the system and provide relief to consumers, small businesses, and exporters.

Under the new proposal, the current four major slabs will be rationalized into just two main tax slabs — 5% and 18%, while a special 40% rate will continue for luxury and “sin” goods. This change is expected to reduce classification disputes, correct inverted duty structures, and make compliance much easier.

Industry experts believe the move will significantly boost MSMEs (Micro, Small and Medium Enterprises) by offering faster refunds, pre-filled returns, and simplified compliance. Exporters are also set to benefit, with up to 90% of refunds being cleared within two to three weeks.

For consumers, the relief will come in the form of lower taxes on essentials and electronic goods, directly reducing the financial burden on households. The government estimates that while the reform may cost around $20 billion annually in revenue, it could lift GDP growth by 0.6 percentage points and increase domestic consumption.

The government has targeted Diwali 2025 for the official rollout of GST 2.0, with the GST Council and Group of Ministers set to finalize details in the coming weeks.

In short, Modi’s GST reform is a step towards a more transparent, business-friendly, and consumer-friendly tax system, setting the stage for stronger economic growth.