Next-Gen GST: 2025 Belonged to India’s Middle Class

Sabyasachi K.
The year 2025 will likely be remembered as the moment India’s reform agenda aligned decisively with everyday realities. For once, policy did not remain confined to macro indicators or long-term promises, it translated into visible relief for the middle class and the common citizen.
Guided by the vision articulated by Prime Minister Narendra Modi, this phase of reforms placed household finances, ease of living, and economic aspiration at the centre of governance.

The tone was set early. In his Independence Day address, the Prime Minister acknowledged a truth often stated but rarely acted upon: the middle class contributes enormously to nation-building yet continuously strives for stability and a better quality of life. What followed was a rare instance where words were swiftly matched by policy action. Taxation, GST, labour reforms and investment policies moved in tandem, creating a sense of coherence that is often missing in reform cycles.

The most direct and widely felt change came through income tax reform. By exempting incomes up to Rs 12 lakh and increasing the standard deduction to Rs 75,000, the government offered genuine financial breathing room to salaried professionals and retirees alike. Nearly 90 per cent of taxpayers, around seven crore individuals, now fall within the tax-free bracket.
This was not symbolic relief. For a taxpayer earning Rs 12 lakh, savings can go up to Rs 1.75 lakh annually. Such numbers matter because they alter monthly household decisions, from consumption to savings.

More importantly, the macroeconomic impact is significant. Middle-class households tend to spend a large share of additional income. The resulting boost to consumption, estimated at nearly Rs 5 lakh crore, has the potential to lift private demand and reinforce growth momentum. Instead of stimulus driven by government spending alone, 2025 marked a shift towards consumption-led confidence from the ground up.

GST reform reinforced this approach. The introduction of GST 2.0 simplified a system long criticised for its complexity. By removing the 12 per cent and 28 per cent slabs and consolidating rates around 5 and 18 per cent, taxation became more transparent and citizen-friendly. Essential food items were exempted, daily-use personal care products became cheaper, and education supplies were freed from tax. These changes may appear incremental on paper, but together they reduce the cost of living in a tangible way.

Key household expenses also saw relief. Lower GST on two-wheelers, small cars, cement, and construction materials directly benefits young families and first-time homebuyers. Farmers gained from reduced taxes on agricultural machinery, while students and parents felt the easing of education-related costs. The message was clear: taxation should reflect real-life priorities.

Healthcare reforms added a crucial social dimension. Zero GST on life-saving cancer drugs and medicines for rare diseases, along with minimal taxation on medical oxygen and diagnostics, acknowledged the financial vulnerability that illness brings. This alignment of fiscal policy with social need strengthened the credibility of the reform agenda.

Beyond taxes, labour code reforms simplified compliance while expanding social security, encouraging formalisation and job creation. Liberalised FDI norms, including 100 per cent foreign investment in insurance and forward-looking steps such as the SHAANTI Bill and major digital infrastructure investments signalled confidence in India’s long-term future.

What ultimately distinguishes 2025 is the harmony of its reforms. Direct tax relief, GST rationalisation, labour and investment reforms, and fiscal discipline worked together rather than in isolation. By focusing on ease of living and household prosperity, this reform cycle reaffirmed a simple idea: when the middle class feels secure, the economy gains resilience. In that sense, 2025 was not just another reform year, it was a recalibration of priorities.

( The author is a senior communication consultant and former journalist. Views are personal.)