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Wed, Aug 27, 2025, 06:06
India Plans to Simplify Tax System by 2025
2025/08/22, 20:28
The Indian government has announced a large-scale reform of the Goods and Services Tax (GST) system. According to a statement by Prime Minister Narendra Modi during his Independence Day address in 2025, a transition is planned from the current four-tier GST system to a simplified two-tier one. The goal of these changes is to reduce the tax burden and simplify doing business.
Key changes of the new structure:
- Two main rates will be introduced: 5% on essential items and 18% on most other goods and services.
- The existing 12% and 28% GST rates will be abolished.
- A special increased rate of 40% is proposed for so-called "sin goods" (such as tobacco and luxury cars).
The final decision on the reform must be made by the GST Council, which includes finance ministers from both the central government and the states, at a meeting in September 2025. If approved, the new system could be implemented as early as the Diwali festival (2025).
Despite the expected benefits for consumers and businesses, some states have expressed concern about potential revenue losses and have requested compensation guarantees from the central government.
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