The central government may balance the loss in revenue owing to PM Narendra Modi’s “big Diwali gift” to the public in the form of GST rate cuts through proposed indirect tax reforms using dividend income, divestments, and easing inflation, sources told Zee Business. The Centre is set to take a hit of Rs 50,000-60,000 crore due to the proposed GST rate cuts, they added. The news comes against the backdrop of the Prime Minister’s big announcement from the ramparts of Red Fort in the national capital on Independence Day, August 15, 2025. 

PM Modi promised ‘double Diwali’ gift in form of substantial GST cut for common man

“This Diwali, I am going to make it a double Diwali for you. This Diwali, you fellow countrymen are going to get a very big gift,” announced PM Modi. 

Reiterating his government’s commitment to big reforms in the indirect tax framework introduced in 2017, the PM said that the Centre emphasised the need to review GST rules having already cut the tax burden on the public over the past eight years. He said that the government has already begun the GST review by setting up a high-power panel and held discussions with the states.

Next generation GST reforms coming, a big gift for you this Diwali: PM Modi 

Stating that the government is working on the next generation GST reforms, PM Modi described the upcoming GST changes as a “Diwali gift”, promising to substantially lower the taxes borne by the common man.

“Our MSMEs, our small entrepreneurs, will get a huge benefit,” said the PM, vowing to make a host of everyday items “very cheap” to give “a new boost” to the economy.

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After PM Modi’s big GST promise, what next? 

The Group of Ministers is set to meet on August 20 and 21 to consider aspects such as rate rationalisation, insurance, and compensation cess, said the sources. This ministerial group is set to deliberate in detail the central proposal, which aims to rework the current GST structure to keep only two main rates: 5 per cent and 18 per cent. 

The GST Council — the top GST rate deciding panel headed by the Union Finance Minister and comprising state/UT finance ministers — is set to meet next on September 18-19. This top-level committee is responsible for all major decisions relating to the indirect tax regime, including those concerning GST rates, exemptions, threshold limits, compliance procedures, and key policy issues.

The panel also makes recommendations to ensure GST is harmonised across the country while addressing specific concerns raised by state or UT representatives. 

What can you expect in the new GST rate structure? What may get cheaper or dearer?

The Group of Ministers is set to discuss the following aspects during the upcoming meeting: 

• The central government reportedly aims to bring a host of everyday items under the 5 per cent or zero GST slabs, including food items, toothpaste, milk, ghee and stationery, said the sources. 

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• The next-generation GST reforms  are aimed at bringing almost 99 per cent of the items currently taxed at 12 per cent under the 5 per cent GST or no GST categories. Besides, white goots
• White goods, buses, two-wheelers and cement are planned to be brought under 18 per cent GST, in stark contrast to the current 28 per cent applicable slab.
• The central government also proposes to shift nearly 90 per cent of items currently under the 28 per cent slab to the 18 percent category.
• Small cars are proposed to be brought under the 18 per cent slab.
• Sin goods — such as tobacco, cigarettes, and pan masala — are proposed to be placed in the 40 per cent category. The proposed changes are set to leave only 5-7 products under the 40 per cent GST category.
• While insurance is proposed to be brought under either zero or 5 per cent GST, renewable energy items are planned to be brought under the 5 per cent GST slab.

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