Prime Minister Narendra Modi has announced that next-generation Goods and Services Tax (GST) reforms are on the horizon, with implementation targeted by Diwali. The reforms aim to reduce the tax burden, particularly on commonly used items, and to simplify the GST structure.

The proposed GST reforms are built on three pillars: structural reforms, rate rationalization, and ease of living. The current GST structure includes rates of 5%, 12%, 18%, and 28%, along with a compensation cess for luxury and sin goods. The proposed framework aims to reduce this to primarily two rates—5% and 18%—with a 40% levy on sin and luxury goods.

Here’s a breakdown of what may get cheaper:

• Daily Essentials: Items like groceries, medicines, televisions, and washing machines are expected to become more affordable.
• Agricultural Equipment: Agricultural equipment is set to become cheaper, providing relief to farmers.
• Bicycles: Bicycles are also expected to see a reduction in price.
• Insurance and Education Services: These services may also become more affordable.
• Items Currently in the 12% Slab: Many of these items, such as condensed milk, dried fruits, frozen vegetables, sausages, pasta, jams, bhujiya, tooth powder, feeding bottles, carpets, umbrellas, utensils, furniture, pencils, handbags made of jute or cotton, and footwear under ₹1,000, could see their rates drop to 5%.
• Items Shifting from the 28% Slab: A significant number of items currently in the 28% slab are expected to move to the 18% slab, which will reduce their prices. This includes daily-use products and electronic items.
• Other Items: Additional items that may get cheaper include fertilizers, construction items, handcrafts, automotive parts, hair oil, air conditioners, computers, sewing machines, water filters, vaccines, and electric irons.

The changes are expected to benefit small industries and MSMEs, while boosting disposable incomes for the middle class. By reducing the tax burden on daily-use items, the reforms aim to increase consumption across the economy.

The Centre has forwarded its proposals to the Group of Ministers examining rate rationalization, which will then place recommendations before the GST Council. The GST Council, which includes finance ministers from all states and is chaired by the Union finance minister, will have the power to accept, modify, or reject the proposals.

The GST was implemented on July 1, 2017, replacing a complex system of indirect taxes with a single, unified system. Over the years, GST collections have grown, reflecting the increasing formalization of the economy and improved tax compliance. Gross GST collections reached a record ₹22.08 lakh crore in 2024-25, marking a 9.4% year-on-year growth.

With the proposed next-generation GST reforms, the government aims to further simplify the tax structure, reduce rates, and enhance the ease of living for citizens.