Two-slab structure to replace 5-28% rates, PM Modi announces in Independence Day speech

The Centre has proposed to replace the current multiple slabs with a two-slab structure as part of the next phase of reforms under the Goods and Service Tax (GST) regime by Diwali, Prime Minister Narendra Modi announced in his speech on August 15, 2025.

“This Diwali, I am going to make it a double Diwali for you. Over the past eight years, we have undertaken a major reform in GST. Now, we are bringing next-generation GST reforms. This will reduce the tax burden across the country,” Modi said.

“GST has simplified the tax system for the common citizen. We are working on next generation GST reforms which will further empower common citizens, MSMEs and industries,” the PM’s X handle later posted.

“To build an ‘Atmanirbhar Bharat’, the Central Government is proposing significant reforms in GST. It will be focused on 3 pillars, namely  structural reforms, rate rationalisation, and  ease of living,” the Union Ministry of Finance posted on X.

The Central Government has sent its proposal on GST rate rationalisation and reforms to the Group of Ministers (GoM) constituted by the GST Council to examine this issue, it added.

The ministry noted that key areas identified for next-generation reforms include the rationalisation of tax rates to benefit all sections of society, especially the common man, women, students, middle class, and farmers.

“Reforms will also seek to reduce classification-related disputes, correcting inverted duty structures in specific sectors, ensuring greater rate stability, and further enhancing ease of doing business. These measures would strengthen key economic sectors, stimulate economic activity, and enable sectoral expansion,” said the ministry.

As part of pillar 2, the government plans to “Essentially move towards simple tax with 2 slabs — standard and merit. Special rates only for select few items,” according to the ministry.

The current slabs are 5 per cent, 12 per cent, 18 per cent and 28 per cent.