Insights
GST: ‘Reforms to boost consumption, relieve public tax burdens, drive economic growth’
September 9, 2025The proposed changes represent a significant advancement towards enhancing predictability and simplifying the complexity of the GST regime. The transition of most goods to a two-slab system demonstrates the government’s commitment to addressing long-standing requests from both industry stakeholders and consumers for a more straightforward tax framework. This move is anticipated to reduce classification disputes and lessen the administrative burden on businesses.
The rationalization of rates is strategically designed to stimulate domestic consumption, particularly in anticipation of the upcoming festive season. These measures directly respond to escalating consumer prices and aim to increase disposable income among the public, thereby fostering demand-led economic recovery.
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Sector-specific initiatives further illustrate the government’s intent to leverage the GST framework to address targeted sectoral requirements and social objectives. Notably, the tax exemption on insurance is expected to enhance the accessibility of essential services for a broader population segment.
Steps to resolve persistent issues related to inverted duty structures in sectors such as man-made textiles and fertilizers are poised to improve liquidity and competitive standing by enabling these industries to claim higher input tax credits.
Despite unanimous passage of the reforms, some states have raised concerns regarding potential short-term revenue losses. Recent estimates suggest that the total revenue deficit from rate rationalization could reach approximately ₹48,000 crore. Nonetheless, the Centre maintains that increased consumption and improved compliance will likely mitigate these losses over the medium to long term.
In summary, the 56th GST Council meeting marks a pivotal development for India, balancing consumer-focused rate adjustments, targeted sectoral support, and ongoing simplification of the tax architecture. While short-term revenue challenges for states remain a consideration, the overarching assessment indicates that these reforms constitute a bold and strategic effort to boost consumption, relieve public tax burdens, and drive sustained economic growth.
This article was originally published in Financial Express on 9 September 2025 Written by: Rajat Bose, Partner. Click here for original article
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This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
