Next gen GST to boost cash flow

Union Finance Minister Nirmala Sitharaman on Wednesday stated that the next-generation GST reforms are expected to inject ₹2 lakh crore into the Indian economy, giving consumers more cash in hand that would otherwise have gone toward taxes. She made the announcement while addressing the Outreach and Interaction Program on Next Gen GST Reforms.

Under the new reforms, the GST rate structure has been simplified from four slabs 5, 12, 18, and 28 per cent to just two slabs: 5 per cent and 18 per cent. As part of the restructured regime, 99 per cent of goods earlier taxed at 12 per cent have moved to 5 per cent, and 90 per cent of items under the 28 per cent slab have shifted to 18 per cent. Several companies, including major FMCG players, have voluntarily started implementing rate cuts and passing benefits to consumers even before the official implementation date of September 22, 2025.

Sitharaman highlighted that the GST reforms were designed with multiple priorities, including reducing rates for the poor and middle class, benefiting farmers, supporting MSMEs, creating jobs, and enhancing export potential. She emphasized that the reforms aim to simplify compliance while ensuring broad-based economic benefits.

The minister also pointed to the growth of GST revenue, which increased from ₹7.19 lakh crore in 2018 (FY 2017-18) to ₹22.08 lakh crore in 2025, alongside the taxpayer base rising from 65 lakh to 1.51 crore. She underscored the GST Council as a model of cooperative federalism, noting it is the only constitutional body formed since independence to administer the indirect tax system.

The next-generation GST reforms are expected to boost consumer spending, simplify tax compliance, and enhance overall economic activity, particularly benefiting middle-class households, farmers, and sectors critical to employment and exports. With the reduced slabs and broader participation from companies, the reforms aim to strengthen both the formal economy and revenue collection while making taxation more transparent and efficient.

The new GST regime will come into effect from September 22, 2025, marking a significant step toward the government’s goal of one nation, one tax.

Features and importance:

• Simplified GST structure with two slabs (5% and 18%)

• Majority of goods shifted to lower rates, benefiting consumers

• Increased government revenue and taxpayer base

• Encourages voluntary rate cuts by companies

• Focus on MSMEs, job creation, and exports

• Enhances economic liquidity by putting ₹2 lakh crore back into the economy