Big Bang Reform: Finance Ministry Proposes Two-Slab GST System Following PM’s Independence Day Speech

New Delhi: The Finance Ministry has proposed a simplified two-tier Goods and Services Tax (GST) structure with “standard” and “merit” slabs, along with special rates for certain goods.

The proposal follows Prime Minister Narendra Modi’s Independence Day announcement that next-generation GST reforms will be rolled out by Diwali, offering significant tax relief to citizens and benefits for small businesses.

Submitted to the Group of Ministers (GoM) on GST rate rationalisation, the plan aims to:

• Reduce taxes on essential and aspirational goods to boost affordability and consumption.

• Correct inverted duty structures to cut input tax credit accumulation and encourage domestic value addition.

• Streamline classification to reduce disputes, simplify compliance, and ensure consistency across sectors.

The ministry said the end of the compensation cess has created fiscal space for long-term rate alignment. It added that the reforms will provide clarity on rates and policy direction, strengthening industry confidence and business planning.

PM Modi has also set up a high-level task force to drive broader reforms across governance, taxation, and public services, calling GST rate cuts “the need of the hour.”

Introduced in 2017, GST has become one of India’s most significant tax reforms, unifying the indirect tax system and improving ease of doing business, particularly for SMEs.

With inputs from IANS