In a major economic move, the Modi government has announced a complete overhaul of the Goods and Services Tax (GST) structure. On Wednesday, September 3, the GST Council, chaired by Finance Minister Nirmala Sitharaman, approved a simplified two-tier system of 5% and 18%, while also adding a new 40% slab for luxury and “sin” goods. These changes will take effect from September 22, just before Dussehra, setting the stage for what Prime Minister Narendra Modi called a “Diwali Dhamaka.”
Modi Calls It a “Double Dose” of Growth
Addressing an event in Delhi, Prime Minister Modi hailed the changes as next-generation reforms. He said, “While the media has dubbed these reforms as GST 2.0, I say it is a double dose of growth and support. It means savings for the ordinary household on one hand, and strength for the nation’s economy on the other.”
Modi further highlighted that the reforms would benefit almost every section of society from farmers to the middle class, and from students to women. “From paneer to shampoos and soaps, everything will be very cheap now,” he assured.
What Has Changed?
Introduced in 2017, GST earlier had four slabs 5%, 12%, 18%, and 28%. Now, these have been rationalised into just two 5% and 18% with an additional 40% slab for luxury and sin goods.
This reduction means essential and everyday items like toothpaste, butter, cheese, condensed milk, pasta, coconut water, dry fruits, sausages, air conditioners, television sets, small cars, bikes, gauze, bandages, and diagnostic kits will become cheaper.
Finance Minister Nirmala Sitharaman said the reforms were designed with the common man in mind. “Every tax on the common man’s daily use items has gone through a rigorous review and in most cases the rates have come down drastically. Labour-intensive industries, agriculture, and healthcare will benefit significantly,” she explained.
Why Now?
While the move has been welcomed across political and business circles, the timing has raised questions. Senior Congress leader P. Chidambaram remarked, “The GST rationalisation and the reduction in rates on a range of goods and services are welcome but eight years too late.” He said the current design should never have been introduced and accused the government of ignoring opposition warnings.
Some analysts linked the reforms to U.S. President Donald Trump’s steep tariffs on Indian products, which they said could hurt exports. The argument was that the government wanted to boost domestic consumption to balance the trade shock.
Government Denies Link to U.S. Tariffs
However, Finance Minister Sitharaman dismissed these claims. She clarified, “The tariff turmoil is not a matter that influenced the GST reform… We’ve been at it for more than one-and-a-half years. This has nothing to do with the tariffs.”
Sanjeev Sanyal, a member of the Prime Minister’s Economic Advisory Council, echoed her view, saying that GST reforms had been in the works for years. “You can’t announce a major reform like this without having prepared for a very long period of time,” he said.
Commerce Minister Piyush Goyal also defended the timing, calling it the result of “systematic and step-by-step work” over the last eight years. He said the reforms were “well thought-out” and not a reaction to tariffs imposed just days earlier.
What Lies Ahead?
GST 2.0 will be implemented from September 22, just as the festive season kicks in. Experts believe this will boost consumption, as manufacturers pass on the lower tax rates to consumers. The reforms could also help ease inflation by reducing the retail prices of hundreds of goods, showing a positive impact on the Consumer Price Index (CPI). For households, businesses, and the economy alike, the new GST regime promises to be a true festive bonanza or as many are calling it, a “Diwali Dhamaka.”
Also Read: Why Popular Online Platforms Suddenly Went Dark in Nepal, Full list of Banned Apps in September 2025
