Union Finance Minister Nirmala Sitharaman announced that the upcoming GST reforms will inject ₹2 lakh crore into the Indian economy, significantly boosting liquidity and consumer spending. Speaking at the Outreach and Interaction Program on Next Gen GST Reforms in Visakhapatnam, she emphasised that the simplified tax structure will leave more cash in the hands of citizens, especially the poor and middle class.
The GST Council has approved a major overhaul of the tax system, reducing the existing four tax slabs (5%, 12%, 18%, and 28%) to just two—5% and 18%—effective from September 22, 2025. As part of the reform:
- 99% of goods previously taxed at 12% will now fall under the 5% bracket.
- 90% of items under the 28% slab will shift to 18%.
Sitharaman stated that the reforms will result in lower prices across essential and lifestyle categories, with several FMCG companies already reducing rates ahead of the rollout.
GST collections have grown from ₹7.19 lakh crore in FY 2017–18 to ₹22.08 lakh crore in 2025, reflecting increased efficiency and compliance. The number of registered taxpayers has more than doubled, from 65 lakh to 1.51 crore.
While the government anticipates a revenue shortfall of approximately ₹48,000 crore due to rate cuts, it plans to offset this through RBI dividends, excise duty adjustments, and strategic divestments.
Sitharaman outlined five guiding principles behind the rate rationalization:
- Relief for poor and middle-class citizens
- Support for middle-class aspirations
- Benefits for the farming community
- Promotion of MSMEs
- Focus on employment generation and export-oriented sectors
She also criticized the previous UPA regime’s tax framework, describing it as “tax terrorism,” and highlighted the GST Council as a model of cooperative federalism.
The GST 2.0 reforms are being positioned as a transformative step toward a more inclusive and efficient tax system, with the potential to stimulate demand and drive economic growth ahead of the festive season.
