PM Modi Unveils Next-Generation GST Reforms: Relief for Middle Class, Higher Tax on Luxury Goods
New Delhi, September 21: Prime Minister Narendra Modi, in a nationally televised address on Sunday evening, announced sweeping reforms to India’s Goods and Services Tax (GST), terming it a “next-generation reform to simplify taxation, strengthen savings, and promote fairness.” The reforms will come into effect from tomorrow, September 22, coinciding with the beginning of Navratri.
One Nation, One Tax – Simplified Structure
PM Modi revealed that the GST Council has streamlined the tax system into a two-slab structure:
5% GST on essentials and mass-use items.
18% GST on most goods and services.
A separate 40% slab has been introduced for super-luxury and “sin goods” such as high-end cars, tobacco products, and premium imports.
This, Modi said, brings India closer to the vision of “One Nation, One Tax”, reducing the confusion of multiple rates and easing compliance.
Relief for the Poor and Middle Class
The Prime Minister emphasized that the reforms are aimed at reducing the financial burden on everyday households. According to the government, 99% of items consumed by the middle class will now be cheaper. Essential commodities, medicines, packaged food, and insurance services will attract lower taxes.
“This reform is a double bonanza for the poor, the neo-middle class, and the middle class. Household expenditure will come down, and savings will increase,” Modi declared.
Additionally, the income tax exemption limit has been raised to ₹12 lakh per annum, offering further relief to salaried and self-employed individuals.
Impact on Business and Economy
For small and medium enterprises (SMEs), the reforms bring simplified compliance, including a single monthly filing system. The government expects this to reduce the compliance burden and enhance ease of doing business.
Economists note that while luxury brands and high-end retailers may face challenges due to the steep 40% tax slab, MSMEs and essential goods manufacturers will benefit significantly. Modi reassured investors by stating that the reforms will “strengthen India’s growth story and boost confidence in our economy.”
Savings Festival – GST Bachat Utsav
The Prime Minister described the reform as a “GST Saving Festival” (Bachat Utsav), estimating that citizens will collectively save around ₹2.5 lakh crore annually due to lower taxes and higher exemptions.
Balancing Growth with Responsibility
The higher tax burden on luxury and non-essential goods is being viewed as both a revenue-boosting and socially responsible move. Analysts believe it will encourage balanced consumption, though concerns remain about its long-term impact on luxury industries and foreign brands in India.
Looking Ahead
The reforms are being welcomed as a bold political and economic step, one that reduces complexity while aiming to distribute tax benefits more fairly across income groups. However, experts warn that the success of these reforms will depend on effective implementation and whether retailers pass on the benefits to consumers.
As Modi concluded: “From tomorrow, as Navratri begins, India also begins a new chapter of savings, simplicity, and transparency in taxation.”