The Modi government has introduced a major overhaul of the Goods and Services Tax, calling it the Next-Gen GST. Announced after the GST Council meeting this week, the reforms simplify the structure and cut taxes on a wide range of essentials, services, and consumer goods.
Prime Minister Narendra Modi hailed the move, stressing that the new system is designed to help the aam aadmi along with farmers, MSMEs, the middle class, women, and youth. Sharing his message on X, the Prime Minister wrote:
During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.
— Narendra Modi (@narendramodi) September 3, 2025
The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and…
For eight years, India has run its tax collections through four GST slabs – 5, 12, 18, and 28 per cent. But over time, it became clear that the structure was not working evenly. The 18 per cent slab alone contributed around 67 per cent of the total GST revenue. The 12 per cent slab was barely used, bringing in only about 5 per cent of the inflow. The 5 per cent and 28 per cent slabs together added 18 per cent.
This meant that the real weight of GST collections was already falling on just two slabs – the 5 per cent and 18 per cent categories – which together brought in nearly three-fourths of the total revenue. In 2020-21 alone, GST collections stood at Rs 11.37 lakh crore, and 74 per cent of that came from these two slabs.
The GST Council studied these numbers and decided to drop the 12 per cent and 28 per cent slabs. The 12 per cent slab was removed because of its low contribution. The 28 per cent slab was taken out to give relief to consumers and to push manufacturers to lower the prices of luxury goods. This decision is seen as a step toward a simpler and fairer tax system.
How GST Has Changed Since Its Launch
The Goods and Services Tax was launched on July 1, 2017, at midnight in Parliament’s Central Hall by Prime Minister Narendra Modi and then President Pranab Mukherjee. It was described as India’s biggest tax reform and compared to a “second independence” from the complicated system of indirect taxes.
Initially, GST had five slabs, which were later cut to four. Even with this reduction, critics often said India had one of the most complex GST structures in the world. For small traders and MSMEs, the online filing system was also difficult in the beginning. Many were unfamiliar with computers, and technical errors on the portal caused stress.
Over the years, however, these issues have been reduced. Filing has become smoother, and most businesses have adjusted to the online system. Still, confusion over rates and delays in return filing continued because of the multiple slabs.
Let’s see how life has changed from the pre-GST days to GST
Anyone who ran a shop or even just kept household accounts before 2017 will remember how messy the tax system was. Every product had its own set of levies — excise, VAT, service tax, entry tax, and so on. Often, these were stacked on each other, which meant the final price was always higher than expected. Businesses struggled to keep track, and in the end, consumers paid the bill.
Take basics like wheat, rice, or flour. They carried small but different taxes ranging from 2 to 3.5 per cent, while everyday items such as tea, oil, and sugar were taxed at more than 6 per cent. Even children’s books had a 7 per cent tax. Today, under GST, many essentials fall in the 5 per cent bracket, and some are completely tax-free. For households, that makes groceries and school supplies easier on the pocket.
The story was worse for consumer goods. Soap, toothpaste, and detergents were taxed at close to 27 per cent. A fridge or washing machine could attract a 31 per cent tax. With GST, these products have been moved into the 18 per cent slab, which has brought prices down and made them more affordable for middle-class families.
Construction is another area that saw a big change. Cement once carried a 29 per cent tax, and items like sanitaryware were taxed at 28 per cent. Now they too sit in the 18 per cent slab. For anyone building a home or involved in real estate, this has meant significant savings and better growth in the sector.
Services such as restaurants, hotels, and movies also carried a heavy burden earlier. In some cases, the combined taxes went over 30 per cent. Under GST, these now fall in the 18 per cent category. This has helped tourism and hospitality, while also making leisure activities more affordable.
For businesses, especially MSMEs, the change is perhaps the biggest relief. Earlier, they had to wrestle with different state taxes, endless forms, and the dreaded “tax on tax” effect. GST replaced all that with a single national system. Refunds come quicker, working capital is freed up, and compliance is less of a nightmare.
How This Reform Impacts Everyday Life
Cutting down the number of GST slabs makes life easier for everyone. Businesses will spend less time figuring out which tax rate applies, and traders will have fewer disputes with officials. For consumers, it can mean cheaper prices, especially for items that were earlier taxed at 28 per cent.
Small shopkeepers and big companies alike will find it less confusing to follow the rules.
What the Future Could Look Like
GST was never meant to stay the same forever. It was always designed to improve with time. This reform demonstrates how the system is adapting to suit the needs of the country. By eliminating slabs that were doing little, the government has simplified GST and made it more feasible.
The new system provides businesses with confidence to expand and provides consumers with hope for cheaper prices. It is a reminder that tax reforms do not end on the day they are announced. They keep changing as the economy changes, and that is a good sign for the future.