Towards a Simpler GST: PM Modi’s Independence Day Announcement
Press Release issued on Towards a Simpler GST,PM Modi’s Independence Day Announcement. On the occasion of the 79th Independence Day, Hon’ble Prime Minister Shri Narendra Modi highlighted that the Government is working on the next generation of GST reforms. The proposed reforms aim to simplify the GST framework, rationalise tax rates, and make compliance easier. Notably, these changes may also lead to a reduction in GST rates in the near future, especially on items of common use.
The 3 Pillars of Proposed GST Reforms:
1. Structural Reforms
- Fixing inverted duty structures – Currently, in some sectors, the tax on raw materials is higher than on the final product, causing excess credit buildup. The plan is to align tax rates to support domestic manufacturing.
- Solving classification issues – Clear rules to avoid disputes about which tax rate applies to which product/service.
- Stability & Predictability – Provide long-term clarity so businesses can plan better.
2. Rate Rationalisation
- Lower tax on essential and common goods – To help the middle class, farmers, women, and students.
- Simpler rate structure – Move towards just two tax slabs (standard and merit), with special rates only for a few items.
- End of Compensation Cess – Since states no longer need compensation, this gives flexibility to adjust rates more sustainably.
3. Ease of Living
- Easy registration – Quick, tech-based system for small businesses and startups.
- Simpler returns – Pre-filled GST returns to reduce mistakes.
- Faster refunds – Automated refunds, especially for exporters and businesses facing inverted duty structures.
Key updates from the announcement:
- The Central Government has sent its proposal to the Group of Ministers (GoM) constituted by the GST Council.
- The reforms will be discussed with States to build consensus in the spirit of cooperative federalism.
- The GST Council will review and approve the recommendations in its upcoming meeting.
- The implementation is targeted within this financial year to ensure early benefits to businesses and taxpayers.
