PM Modi Asks States to Work Together on New GST Changes
NEW DELHI, India – August 17, 2025:Prime Minister Narendra Modi is asking state governments to team up and make some changes to the Goods and Services Tax (GST). He’s calling these changes a Diwali gift for the country.
Speaking in New Delhi this past Sunday, Modi said the central government has already shared a draft of these ideas with the states. He hopes everyone can agree on the changes before the holiday season hits. The goal is to make the tax system easier to understand, lower taxes on everyday stuff, and fix some problems that have been around for a while.
What’s Being Proposed?
These GST changes, which Modi first talked about during his Independence Day speech, come after looking at the tax system for eight years. The main idea is to simplify things by moving toward a tax system with just two rates: 5% and 18%.
Finance Ministry people say this should lower taxes on things people use every day. For example, a lot of items now taxed at 12% might go down to the 5% bracket. The really high 28% tax rate would mostly disappear, except for a few luxury items and sin goods like tobacco, which could be taxed at 40%.
India’s GST Change: New Tax Slabs & 40% Rate
Besides changing the rates, the changes also want to:
- Fix the inverted duty structure, which has caused some businesses, like those in textiles and fertilizers, to have a pile-up of tax credits.
- Settle disagreements about how things are classified, so the tax rates are clearer and there are fewer lawsuits.
- Use tech to make it easier to follow the rules, with quicker registration and pre-filled tax returns.
Getting Everyone On Board
This push for changes comes as the GST system is doing well and bringing in more money. Still, making big changes needs everyone to agree in the GST Council. This council includes the Union Finance Minister and finance ministers from all the states and territories. To make a decision, you need three-quarters of the votes, with the central government having one-third of the vote and the states having two-thirds.
While these things are supposed to be good for people and businesses, some states might worry about losing money, especially those that make a lot of stuff. The end of the compensation tax, which helped states cover their losses, gives the GST Council more freedom but also makes any rate changes riskier.
Prime Minister Modi is publicly asking for everyone to work together, which shows how much political and monetary teamwork it will take to pass these changes. He said the changes would help the poor, middle class, and businesses, and he urged states to help make Diwali more fabulous for the people of India. The GST Council is likely to talk about these ideas at its next meeting, probably in September.
