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The growth in formal economy is testimony to the success of GST. If the 2017 revamp was effective, the 2025 reforms are truly transformational
In the last 11 years under PM Narendra Modi’s leadership, the world has witnessed India’s growth rate propelling it to become the fastest-growing economy. (Image: PTI/File)
The Goods and Services Tax reforms introduced by Prime Minister Narendra Modi are among the most transformational economic initiatives undertaken in independent India. These bold reforms will ensure an exceptional foundation of economic empowerment, realising his vision of a ‘Developed India’.
In the last 11 years under Modi’s leadership, the world has witnessed India’s growth rate propelling it to become the fastest-growing economy. While world economies struggled with the Covid-19 pandemic and wars, the Indian economy advanced to become the fourth largest in the world.
A key reason for this was the revolutionary GST introduced in 2017, which completely transformed India’s indirect taxation landscape. Modi demonstrated remarkable political will by implementing the GST through a constitutional amendment, proving to be a force multiplier.
This was in stark contrast to the decades of Congress rule, riddled with red tape and a permit licence quota raj that hindered the economy. Wrong policies and economic mismanagement by successive Congress governments were so dismal that India’s growth rate was derogatorily referred to as the Hindu rate of growth, unfairly tarnishing a particular community.
When the Congress-led UPA government left office in 2014, India was considered one of the fragile five economies in the world. Unable to instil trust in state governments, the Congress failed to introduce the GST during its tenure.
When the historic midnight session of Parliament was held in 2017 to usher in the GST, the Congress boycotted it. Before 2017, citizens and businesses had to navigate a complex maze of indirect taxes like state VAT (value added tax), service tax, excise duties, and so on. Finance minister Nirmala Sitharaman recently remarked on tax collection and devolution to states, noting that when the GST was introduced in 2017, the tax base was about 65 lakh that has now increased to 1.5 crore businesses.
Before the GST, gross tax collection was at Rs 7.19 lakh crore and, today, it is about Rs 22 lakh crore. About Rs 2 lakh crore is collected as GST revenue every month, equally shared with the states with 41 percent of the remaining amount devolved to states.
This growth in the formal economy is testimony to the success of the GST. If the 2017 GST revamp was effective, the 2025 GST reforms are truly transformational.
In his Independence Day address, Modi announced the next-generation reforms as a Diwali gift while promising to reduce the tax burden on citizens, directly benefit every household, and stimulate economic activity. With GST 2.0 coming into force on September 22, this has now become a Navratri bonanza prioritising the welfare of the people.
With substantial simplification of structure and drastic reduction in tax rates, this overhaul will enable economic empowerment for every Indian, making them pivotal stakeholders in the nation’s progress. The 56th meeting of the GST Council elicited consensus among all members to implement these progressive proposals.
An unprecedented aspect was the central government’s comprehensive proposal to facilitate increased consumption and higher savings, thereby acting as a crucial catalyst for economic growth. Rationalising the rates with only two principal slabs of 5 and 18 percent will ease living, greatly benefiting the poor and middle classes.
Daily essentials like toothpaste, shampoo, kitchen utensils, and food items such as bread, milk, butter, and ghee will now be substantially cheaper and more affordable. Educational items such as notebooks, pencils, crayon sharpeners, and charts have been totally exempt.
Thirty-three lifesaving drugs and kits have been placed in the zero-tax category. Tax rates for ayurveda, unani, homoeopathy medicines, along with medical, dental, and veterinary devices, have also drastically dropped.
Individual life insurance, health insurance, and senior citizen policies, previously taxed at 18 percent, are now completely exempt. This brings reassurance and relief for citizens.
Similarly, GST rates on agricultural tractors, harvesters, and irrigation machinery have been conclusively cut for farmers in rural India. Modi has always stressed that the driving force toward a ‘Developed India’ will be our youth.
Job creation, propelled by 6.3 million micro, small, and medium enterprises (MSME) assumes significance. With new structural simplifications, digital registration, prompt refunds, and reduced input costs, MSMEs will be greatly bolstered.
The 2025 GST reforms are truly federal in spirit, strengthening states to pave the way for a ‘Developed India’. They will foster inclusive growth, positively impacting and fulfilling the aspirations of every section of society, including the poor, middle-class families, senior citizens, MSMEs, small shopkeepers, traders, farmers, women, and the youth. These reforms are a game changer and will be the driving force in making India a developed economy.
(The author is a national spokesperson for the BJP, who posts @crkesavan on X. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views)
September 16, 2025, 02:26 IST
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