New Delhi: Finance Minister Nirmala Sitharaman on Wednesday highlighted the economic benefits of the latest Goods and Services Tax (GST) reforms, stating that the rate cuts announced by the Modi government, effective from September 22, will inject ₹2 lakh crore into the economy. She said the simplified tax regime will provide immediate relief to consumers and help boost spending, particularly among the middle class and MSMEs.

New GST structure and benefits

Speaking at the Outreach and Interaction Program on Next Gen GST Reforms, Sitharaman elaborated on the changes in the GST framework. “With this new-generation tax regime, featuring only two slabs – 5 per cent and 18 per cent – ₹2 lakh crore will be injected into the economy. People will have cash in hand to spend,” she said.

The minister added that the majority of items have shifted to lower tax brackets: 99 per cent of goods previously taxed at 12 per cent have moved to the 5 per cent slab, while 90 per cent of items formerly at 28 per cent now fall under 18 per cent. This move is expected to reduce prices across various sectors, benefiting consumers ahead of the festive season.

Industry response and compliance

Several companies, including prominent FMCG brands, have already pledged to lower their prices and pass on the benefits of the GST cuts to consumers before September 22. “We are seeing proactive participation from businesses in aligning with the new tax structure,” Sitharaman said. She emphasised that the reforms were designed considering five key criteria: relief for the poor and middle class, meeting middle-class aspirations, supporting farmers, favouring MSMEs, and focusing on sectors crucial for employment generation and exports.

GST growth and taxpayer expansion

The Finance Minister highlighted the growth of GST revenue since its introduction, noting that the collection reached ₹22.08 lakh crore in 2025, up from ₹7.19 lakh crore in 2018 (FY 2017-18). Taxpayer registration also surged, reaching 1.51 crore from the earlier 65 lakh. According to Sitharaman, the GST Council remains a prime example of cooperative federalism, serving as the sole constitutional body established post-independence to ensure uniformity in indirect taxation.

Simplifying the tax regime

Sitharaman also compared the new GST regime to the previous tax structure under the UPA government. She said, “The UPA government took ten years to implement GST but could not convince the states. Our government has simplified the slabs, streamlined compliance, and ensured that the system is consumer-friendly.” The reduction from four tax slabs (5, 12, 18, 28 per cent) to just two (5 and 18 per cent) is expected to reduce confusion and improve ease of doing business.

Conclusion

The GST rate cuts are poised to provide a significant boost to consumer spending and strengthen the economy, especially with the festive season around the corner. By simplifying taxation and reducing rates on essential goods and services, the government aims to foster inclusive growth and empower both businesses and households across India.