In a historic move that marks a significant turning point in India’s economic landscape, the Modi-led central government has undertaken a sweeping reform of the Goods and Services Tax (GST) structure. Effective from September 22, 2025, the new GST regime simplifies the existing four-tier tax system into just two tiers—5% and 18%. This bold step, touted as the most extensive tax overhaul in independent India’s history, is in line with the long-standing vision of “One Nation, One Tax.” Experts and industry leaders have hailed this reform as transformative, saying it will not only ease compliance burdens for businesses but also bring substantial financial relief to common citizens by reducing prices across a wide range of essential goods and services. The government has reiterated its commitment to a simplified, transparent, and equitable tax system that can boost both consumption and investment.
Under the revised structure, several everyday items have seen a notable drop in tax rates. Products that are part of the average Indian household’s grocery list—such as milk, curd, paneer, dry fruits, chocolates, and biscuits—have had their GST rate slashed from 12% to 5%. Similarly, taxes on vital personal care items like hair oil, soap, toothpaste, and cooking oil have been reduced from 18% to 5%, making them more affordable for middle- and lower-income families. Household appliances such as televisions, air conditioners, refrigerators, and washing machines, which were earlier taxed at 28%, will now attract only an 18% GST. Clothing and footwear, too, have seen a drop in tax from 12% to 5%, enabling consumers to make significant annual savings. This sweeping reduction in taxes is expected to positively impact household budgets across the nation, allowing families to save thousands of rupees each year.
From a business and trade perspective, this reform is a massive relief, particularly for the small traders and Micro, Small, and Medium Enterprises (MSMEs), who have long struggled with the complexities of the earlier four-tier tax system (5%, 12%, 18%, and 28%). The move to a simplified two-tier structure is expected to streamline compliance, reduce paperwork, and accelerate tax refunds. Traders will now spend less time navigating complex documentation and more time focusing on business growth. Furthermore, the simplification of GST processes will likely reduce the scope for tax-related corruption and irregularities. By removing procedural bottlenecks, the government aims to promote formalization and ease of doing business, especially in the informal sector, which forms the backbone of India’s economy. This move aligns with the BJP government’s broader economic philosophy that prioritizes transparency, accountability, and efficiency.
The economic benefits of this reform are particularly visible in states like Tamil Nadu, where multiple key industries are poised to gain from the tax revisions. The textile sector, which includes cotton, yarn, and fabric manufacturing hubs such as Tiruppur and Coimbatore, will benefit from reduced input costs, making Indian textiles more competitive in global markets. The leather and footwear industry, especially in Ambur and Vellore, will also see increased margins and better export prospects with the GST on shoes and leather goods now pegged at 5%. The fisheries sector has been positively impacted as well; tax exemptions on dried fish (Karuvattu) continue, and tax on fishing equipment has been lowered. In the automobile manufacturing corridor of Chennai and Hosur, the reduction in GST from 28% to 18% on small cars and two-wheelers will stimulate demand and potentially create more jobs in production and sales. This integrated approach to taxation reflects a comprehensive effort to stimulate industrial growth while also reducing the burden on the end consumer.
Ultimately, this bold tax reform reflects the Modi government’s long-standing commitment to economic inclusivity under the banner of “Sabka Saath, Sabka Vikas, Sabka Vishwas.” The contrast between the current regime and previous tax structures—characterized by multiple levies like Excise Duty, VAT, Service Tax, and Entry Tax under the Congress-led governments—highlights the magnitude of the current simplification. Those earlier systems varied from state to state and often encouraged inefficiencies and corruption. In contrast, the present GST reform unifies the tax structure across the country, bringing 99% of commodities under the 5% bracket, thereby making the tax regime not only simpler but also fairer. More than just a fiscal policy change, this reform sets the stage for a new economic era—where ease of living and ease of doing business go hand in hand. For states like Tamil Nadu, this development signals a golden era of industrial growth and economic opportunity.