PM Modi’s Address on GST Reforms: Key Highlights
Prime Minister Narendra Modi addressed the nation on 21 September 2025 to announce the launch of the most ambitious Goods and Services Tax reform since its introduction in 2017. Calling it a “double bonanza” for the poor, neo-middle class and middle class, Modi said the reforms would bring relief to every household. He declared that from Navratri, India would celebrate a “GST Bachat Utsav”, or a festival of savings, as the new tax rates would directly reduce the burden on families.
In his address, Modi stated that GST 2.0 has fulfilled the long-term dream of “One Nation, One Tax.” He elaborated that the government has struck a reasonable compromise by lowering taxes on essential goods and raising taxes on luxury and bad goods. He further noted that the recent extension of the income tax exemption up to ₹12 lakh ties directly with the GST relief contributing to more fourth-income remaining in the household. Modi stressed that these new changes will all help MSMEs, increase domestic manufacturing, and take India a step closer to Atmanirbhar Bharat.
Simplified GST Structure: From Four Slabs to Two
Under GST 2.0, the government has drastically simplified the tax system. The earlier four-rate structure of 5%, 12%, 18% and 28% has been collapsed into just two main slabs: 5% and 18%, with the addition of a new 40% slab for luxury and sin goods. The 5% rate now covers daily essentials, medicines, economy travel, and most FMCG products. The 18% slab applies to electronics, automobiles, apparel below premium thresholds and a wide range of services. The highest 40% slab is reserved for products such as cigarettes, liquor, luxury vehicles, and expensive clothing and accessories.
What Becomes Cheaper After GST 2.0
For the average Indian household, food and daily-use essentials are set to become much more affordable. Items such as chapati, paratha, UHT milk, paneer, breads, ghee, butter, edible oils, sauces, pasta, cornflakes and dry fruits now attract either 0% or 5% GST, leading to lower grocery bills. Similarly, personal care and household goods like soaps, shampoos, toothpaste, toothbrushes, kitchenware and umbrellas have moved to the 5% slab, ensuring savings on everyday purchases.
The reforms will also benefit the electronics and appliance industry, as products such as televisions, air conditioners, refrigerators, dishwashers, and small home appliances now incur a tax rate of only 18%, rather than 28%. This, in turn, will target the middle-class consumer market and generate consumer demand. Small cars, motorcycles up to 350 cc and three-wheelers will also be cheaper in the automobile sector with their GST rate cut from 18% to 28%.
Healthcare is another big beneficiary. Life-saving medicines, spectacles, diagnostic kits and certain medical devices will now fall under the exempt or 5% category, reducing costs for patients and easing the financial burden on families. The tourism industry too gets a boost, as hotel rooms under ₹7,500 per night and economy flight tickets will now attract just 5% GST, making domestic travel more affordable.
What Gets Costlier Under GST 2.0
While essentials and electronics are becoming cheaper, luxury and sin goods will now face significantly higher taxation. Cigarettes, gutkha, paan masala, aerated drinks and carbonated beverages are pushed into the new 40% slab, making them costlier. Similarly, luxury cars, premium SUVs and motorcycles above 350 cc will now attract 40% GST, discouraging extravagant consumption.
The clothing sector will see a split impact. Everyday apparel remains affordable, but premium clothing and accessories priced above ₹2,500 per piece have been moved to the 18% slab from the earlier 12%, raising their retail prices. In the energy sector, coal has been shifted from 5% to 18%, which may indirectly increase power generation costs.
Impact Across Key Sectors
The GST 2.0 reforms seek to advantage the many, while placing a heavier tax burden on consumption of luxury goods. For tourism, the configuration of lower prices for hotels and flights will encourage travel in the domestic market. For clothing, those at the budget end will see price relief while high end shoppers will see increases to the cost of their apparel. Fuel remains largely unchanged because petrol and diesel still sit outside the GST line of taxes. For electronics, reduced tax will hopefully boost sales of television’s, AC’s and appliances. Finally, in health care, price reductions on medicines, medical devices and policies will directly benefit millions of households.
A Festival of Savings for India
By combining tax relief on essentials with higher levies on luxury goods, GST 2.0 reflects a shift towards fairness and inclusivity in India’s taxation system. PM Modi framed the reform as a festival of savings that will bring happiness to households, strengthen MSMEs, and promote local manufacturing under the Atmanirbhar Bharat mission. The poor and middle class emerge as the biggest winners, while luxury consumers shoulder a greater tax burden.
If businesses and retailers pass on the benefits to consumers, GST 2.0 could not only lower inflation but also boost consumer demand and drive India’s economic growth in the coming festive season!
