Finance Ministry Suggests Two-Slab GST Structure and Tax Cuts Following PM Modi’s I-Day Address

Following Prime Minister Narendra Modi’s emphasis on advancing the next stage of Goods and Services Tax (GST) reforms, the Finance Ministry proposed a streamlined two-slab GST rate system along with special rates for select products. The proposal has been forwarded by the Central Government to the Group of Ministers (GoM), set up by the GST Council, for examination.

PM Modi’s Announcement on GST

During his speech to the nation on the 79th Independence Day, PM Modi said the upcoming GST changes will significantly reduce the tax load and help small businesses. He also mentioned that the reforms would be put into action by Diwali. The Finance Ministry presented their proposal with the GoM shortly after this statement. According to an official post on X, the reform plan focuses on three main areas:

• Structural reforms
• Rate simplification
• Making life easier for citizens

From Four Slabs to Two

At present, GST is divided into four slabs—5%, 12%, 18%, and 28%. The new plan suggests cutting these down to just two—standard and merit rates. This shift aims to create a simpler and more transparent tax system that is easier for people and businesses to understand.

Lower Taxes on Common Goods

The proposal also calls for reducing taxes on everyday items and certain aspirational goods. According to the ministry, this would improve affordability, encourage more buying, and ensure that essential and desired products are within reach for more people.

Next Steps for Discussion

The ministry stated that the goal is to promote a positive, inclusive, and agreement-based discussion among all stakeholders. The GST Council, headed by Finance Minister Nirmala Sitharaman and including state ministers, is likely to hold a meeting in September to review the GoM’s recommendations on rate revisions. PM Modi had earlier pointed out that with GST now completing eight years since its launch on July 1, 2017, it is the right time to carry out new reforms. The GST system had replaced multiple central and state taxes to create a single indirect tax framework across the country.