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GST Reform 2025 to Be Implemented from 22nd September | Current Affairs | Vision IAS
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GST Reform 2025 to Be Implemented from 22nd September

Posted 08 Sep 2025

Updated 09 Sep 2025

2 min read

Article Summary

Article Summary

The GST reforms introduce a simplified two-tier structure, new luxury taxes, and benefits like lower prices, support for MSMEs, and expanded tax compliance, despite potential revenue and implementation challenges.

Next-Gen GST reforms build on GST’s success with a simplified 2-tier structure (5% and 18%), fairer taxation, and digital filing for ease and faster refunds.

  • A new 40% tax rate has been introduced for luxury and sin goods like pan masala, cigarettes, etc.

Benefits of the Recent Changes

  • Social Protection: Exemption of GST on insurance and essential medicines strengthens household security and access to healthcare.
  • Lower Prices, Higher Demand: Cheaper goods and services increase household savings and stimulate consumption.
  • Support for MSMEs: Reduced rates on inputs like cement, auto parts, and handicrafts lower costs and make small businesses more competitive.
  • Ease of Living: A two-rate structure means fewer disputes, quicker decisions, and simpler compliance.
  • Wider Tax Net: Simpler rates encourage compliance, expanding the tax base and improving revenues.

Key Challenges in recent changes

  • Revenue foregone: It could lead to a revenue loss of ~₹48,000 crore (on the FY23-24 consumption base), as per the Finance Ministry.
  • Removal of input tax credit (ITC): From goods such as healthcare products and insurance may lead to the problem of cascading taxes. 
  • Lack of clarity over revival of National Anti-profiteering Authority: It was initially set up for two years (that can be extended by the GST Council) to ensure businesses passed on the benefits of GST rate cuts to consumers.
  • Tags :
  • Goods and Services Tax
  • GST Reforms
  • GST 2.0
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