'Big surprise this Diwali': PM Modi says next-gen GST reforms will cut tax on daily-use items

Prime Minister Narendra Modi, in his Independence Day 2025 address, announced that the next wave of GST reforms will be rolled out by Diwali, promising tax relief on everyday-use items and a simpler, more accessible tax system.

“A big surprise awaits all Indians this Diwali,” the Prime Minister said, declaring that the government will implement the next generation of GST reforms ahead of the festival season.

He stated that items of daily use will become very cheap under the planned reforms. Modi also added that small businesses and entrepreneurs will benefit, framing the move as both pro-consumer and pro-business.

While specifics were not provided during the speech, the announcement aligns with broader policy discussions underway to restructure the GST rate system—particularly the proposal to eliminate the 12% slab and reassign items to either the 5% or 18% categories.

India’s current GST framework consists of five primary tax rates — 0%, 5%, 12%, 18%, and 28% — along with special rates of 0.25% and 3% that apply to precious metals. An analysis of the GST structure reveals that approximately 21% of all goods fall under the 5% category, while 19% are taxed at 12%. The largest share, 44% of items, is taxed at the 18% rate. The highest slab of 28% applies to only 3% of the total goods, typically reserved for luxury or sin items.

The announcement comes just weeks before the 56th GST Council meeting, where key decisions related to rate rationalisation and compliance restructuring are likely to be taken.

If passed, these would mark the most significant consumer-focused changes to the GST system since its introduction in 2017.