PM Modi Announces GST Reduction and Major Employment Scheme on Independence Day, Plans to Cut GST Slabs from Four to Two
On Independence Day, Prime Minister Narendra Modi made two landmark announcements from the Red Fort. He launched the Pradhan Mantri Viksit Bharat Rojgar Yojana and revealed that the government will soon implement GST reforms to lower taxes before Diwali.
Addressing the nation, PM Modi said, “Today, I bring good news for the youth of my country. On August 15, we are launching the Pradhan Mantri Viksit Bharat Rojgar Yojana with an investment of ₹1 lakh crore, which will create employment opportunities for 3.5 crore young citizens.”
The Prime Minister also announced that this Diwali, citizens can expect a major tax relief with reduced GST rates. After eight years of GST implementation, the government has reviewed and simplified the taxation structure to lower taxes for common people and make daily essentials more affordable.
According to official sources, items currently taxed at 12% GST such as toothpaste, utensils, clothes, and shoes are likely to be shifted to the 5% slab. This move will benefit middle-class and low-income families the most. Presently, GST has four slabs: 5%, 12%, 18%, and 28%. The government is considering eliminating the 12% slab entirely and restructuring rates to give more relief to consumers.
The Finance Ministry has confirmed that a proposal for GST simplification and reform has been sent to the Group of Ministers (GoM) of the GST Council. The suggested changes aim to reduce the four GST slabs to just two, making the system simpler and more transparent.
The proposed GST reforms are based on three main pillars:
1. Structural Reforms Correcting the inverted duty structure to balance taxes on raw materials (inputs) and finished goods (outputs), reducing the burden of excess input tax credit (ITC), and promoting domestic manufacturing.
2. Simplification of Tax Rates Reducing GST on essential and aspirational goods such as food, clothing, smartphones, and televisions to make them more affordable and stimulate consumption. The government is also proposing a two-tier GST system one standard rate and one concessional rate replacing the current four slabs.
3. Business-Friendly Measures Introducing tech-based, time-bound registration for small businesses, pre-filled tax returns to minimize errors, and faster, automated refunds for exporters and industries affected by the inverted duty structure.
The GST Council is expected to review these recommendations in its upcoming meeting, with the aim of implementing them within the current financial year so that benefits can reach citizens quickly.
Since its launch on July 1, 2017, GST has significantly boosted India’s tax collection and widened the taxpayer base. In the financial year 2024-25, gross GST collection stood at ₹22.08 lakh crore, nearly double the ₹11.37 lakh crore collected in 2020-21. Monthly average GST collections have increased from ₹95,000 crore to ₹1.84 lakh crore over the last five years. The number of registered taxpayers has grown from 65 lakh in 2017 to over 1.51 crore today.
The government claims that GST has strengthened India’s economy, enhanced transparency, and streamlined the taxation system by replacing 17 central and state taxes and 13 cesses with one unified indirect tax.
