Next-Gen GST: Rate Cuts Done, Process Reforms Next: How India's GST Is Being Rebuilt
The Union Finance Ministry set out the government's view of "Next-Gen GST", the second big round of reform of the Goods and Services Tax (GST) since it began on 1 July 2017.
Next-Gen GST has two linked aims: (1) reduce and simplify tax rates, and (2) make compliance easier (compliance means all the work a business does to follow tax rules: registering, filing returns, paying tax, claiming refunds).
The first part, the rate changes, came into force on 22 September 2025. Most goods now fall into two main slabs (5% and 18%), with a special 40% rate for a small list of luxury and harmful goods.
The second part, a package of process reforms (registration, returns, refunds, input tax credit and litigation), is going before the GST Council at its next meeting.
The stated goal is relief for households, more certainty for businesses, and a system where honest taxpayers can follow the rules without needless trouble. The reforms draw on nine years of GST experience of taxpayers and states.
Goods and Services Tax (GST): Constitutional Framework and Structure
The Goods and Services Tax, or GST, is a single tax on the supply of goods and services across India. It replaced a long list of separate central and state taxes in one go on 1 July 2017. It is collected at every step where something is sold, but each seller pays tax only on the value they add. Because it is finally paid by the person who buys and uses the product, it is a consumption tax.
Next-Gen GST builds on this constitutional and legal structure. The rate part (22 September 2025) changed the slabs inside the same framework. The process part, now before the GST Council, aims to fix the pain points seen in nine years of GST: refunds, blocked credit, small-value notices and complex registration.
GST Rate Rationalisation (Two-Rate Structure)
GST rate rationalisation means cleaning up the GST rate structure: fewer slabs, lower rates on common goods, and fixing cases where similar items were taxed differently. In September 2025, the GST Council replaced the old four-slab system with a mainly two-rate system. For a full explanation of how and why this was done, see the complete concept article.
The rate cuts of 22 September 2025 are the first half of Next-Gen GST. The process reforms now going to the Council are meant to complete it, so that lower rates come with simpler rules.
The GST Council (Article 279A)
The GST Council is the joint body of the Union Finance Minister and the finance ministers of all states. It recommends GST rates, exemptions, model laws and procedures. It was created by the Constitution through Article 279A, inserted by the 101st Amendment, 2016.
Both halves of Next-Gen GST go through the Council. The rate changes were recommended at its 56th meeting, and the process reforms (refunds, credit, registration, notices) are now on its agenda.
- Next-Gen GST rate changes in force from 22 September 2025
- Two aims of Next-Gen GST: rate reduction and rationalisation, and easier compliance
- GST launched 1 July 2017; about nine years of implementation by 2026
- Main slabs now 5% and 18%; special rate 40%
- Constitution (101st Amendment) Act, 2016: Articles 246A, 269A, 279A
- GST Council: chaired by the Union Finance Minister; decisions by three-fourths weighted majority