PM Modi Announces Major GST Reduction from October 2025 — Key Sectors to Benefit, Millions to Save Big

India PM Narendra Modi has announced significant Goods and Services Tax (GST) cuts starting October 2025, aiming to boost consumption, reduce inflation, and benefit millions of citizens and businesses across key sectors

Aug 15 (Reuters) – Indian Prime Minister Narendra Modi said on Friday the goods and services tax (GST) would be reformed and taxes lowered by Diwali, the Hindu festival of lights, set to be celebrated in October this year.

“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 goods and services tax. We are bringing next-generation GST reforms that will reduce the tax burden across the country,” he said during a speech to mark the country’s anniversary of independence.

Modi’s announcement comes as India moves to simplify its GST structure, with a group of ministers preparing a report that will consider merging tax slabs and lowering rates on some products.

The government has previously said that it wants to change GST rates and reduce the number of brackets, referring to tax rates for different categories, under a tax regime introduced in 2017.

The country currently levies GST at 5%, 12%, 18% and 28% on most goods and services, excluding gold and silver, and applies an additional levy on so-called demerit items such as cigarettes and high-end cars.

Citi estimated that about 20% of items – including packaged food and beverages, apparel and hotel accommodation – fall under the 12% GST slab, accounting for 5-10% of consumption and 5-6% of GST revenue.

If most of these are moved to the 5% slab and some to the 18% slab, it could lead to a revenue loss of around 500 billion rupees, or 0.15% of GDP, potentially taking the total policy stimulus for households in the current 2025-26 financial year to 0.6%-0.7% of GDP, the brokerage said.

Reporting by Shilpa Jamkhandikar, YP Rajesh, Nikunj Ohri and Chandini Monnappa; Editing by Clarence Fernandez and Raju Gopalakrishnan

In a landmark economic announcement, Prime Minister Narendra Modi has declared that the Government of India will implement significant reductions in the Goods and Services Tax (GST) starting October 2025. The decision, aimed at boosting consumer spending, stimulating industrial growth, and easing the tax burden on the middle class, is expected to directly impact millions of citizens and businesses across the country.

During his public address in New Delhi, PM Modi emphasized that GST reforms have been a long-standing demand from industry bodies, retailers, and consumers. The upcoming tax cuts are part of a broader strategy to strengthen India’s economic momentum, especially at a time when the nation is pushing to become the world’s third-largest economy by 2027.

While the final list of revised GST rates will be unveiled by the GST Council in September, government sources indicate that the cuts could focus on:

Consumer Electronics & Home Appliances – Items such as TVs, refrigerators, and washing machines may see GST drop from 18% to 12%, making them more affordable for households.
Food & Beverages – Packaged food products and restaurant services could see reductions from 12% to 5%, encouraging more dining out and boosting the hospitality sector.
Automobiles & EVs – To support green mobility, electric vehicles may get GST reduced from 12% to 5%, while small petrol and diesel cars could also benefit from lower rates.
Construction & Housing – Affordable housing projects may get tax relief, potentially lowering GST from 5% to 1% under certain schemes.

Economists suggest that the GST cuts will have a dual impact — providing immediate relief to consumers while helping businesses recover from cost pressures. Lower taxes are expected to reduce inflationary trends in the retail market, enhance purchasing power, and trigger higher demand across sectors.

Industry experts estimate that if implemented as planned, the October GST cuts could increase GDP growth by 0.5–0.8% in FY 2025-26 and generate thousands of new jobs in manufacturing, retail, and logistics.

The timing of the announcement is notable. With major state elections later this year and the 2026 General Elections approaching, the GST reduction could serve as both an economic booster and a political advantage for the ruling government.

Financial analysts also note that the move signals India’s commitment to tax reforms, ensuring a simpler and more business-friendly environment.

The GST Council will meet in September 2025 to finalize the revised rate structure. Implementation from October 1, 2025, will mark one of the most significant tax policy changes since GST’s introduction in July 2017.

With millions set to save more and industries gaining fresh momentum, PM Modi’s October GST cut announcement is being hailed as a game-changing economic decision that could redefine India’s growth story in the coming years.

PM Modi Announces Major GST Reduction from October 2025 — Key Sectors to Benefit, Millions to Save Big