current affairs 2025

New Tax Reforms & GST Council Decisions

by Prince Luthra Sir (UPSC CSE AIR 577) · 24 February 2025

4️⃣ New Tax Reforms & GST Council Decisions 💸

🔹 Introduction

The taxation system in India is divided into direct taxes (income tax, corporate tax) and indirect taxes (GST, excise duties). The Goods & Services Tax (GST) is a destination-based tax that replaced multiple indirect taxes in 2017. The GST Council, chaired by the Union Finance Minister, is responsible for tax rate modifications and policy decisions.

In 2025, the government introduced new tax reforms to enhance ease of doing business, increase tax compliance, and boost revenue collection. The GST Council’s key decisions aim to simplify tax slabs, reduce litigation, and expand the tax base.

🔹 Key Tax Reforms & GST Decisions (2025)

✅ GST Rate Rationalization & Slab Changes 🏭

The 4-tier GST structure (5%, 12%, 18%, 28%) may be merged into a 3-tier structure to simplify compliance.
Luxury items & sin goods continue to attract 28% GST + cess.

✅ Bringing Petroleum Products Under GST ⛽

Ongoing discussions on including petrol & diesel under GST to reduce fuel price volatility.
States oppose it due to loss of VAT revenue.

✅ Direct Tax Reforms 💰

Possible changes in income tax slabs, providing relief to middle-income groups.
New capital gains tax structure to remove anomalies in equity & real estate taxation.

✅ E-Invoicing & Digital Taxation 💻

Mandatory e-invoicing for businesses above ₹5 crore turnover to curb tax evasion.
New rules for cryptocurrency taxation under GST & Income Tax Act.

✅ GST Tribunal for Faster Dispute Resolution ⚖️

National GST Appellate Tribunal (GSTAT) set up to resolve tax disputes faster.
Reduction in tax-related litigation benefiting MSMEs & startups.

🔹 Prelims Focus Areas

What is GST? Features of GST Act, 2017
GST Council – Composition & Voting Mechanism
Difference between Direct & Indirect Taxes
New Tax Reforms & Capital Gains Taxation
E-Invoicing & Digital Taxation Reforms

📌 MCQs on Tax Reforms & GST (2025)

1️⃣ Which body is responsible for making decisions on GST rates and policies?

A) Reserve Bank of India (RBI)
B) Ministry of Finance
C) GST Council
D) NITI Aayog

Tap here for Answer

Answer: C) GST Council

Explanation:

The GST Council, chaired by the Union Finance Minister, is responsible for tax rate changes, exemptions, and policy decisions under GST.
It consists of representatives from both central and state governments.

2️⃣ Which tax reform was introduced in the 2025 Budget for direct taxation?

A) New wealth tax on high-income individuals
B) Abolition of income tax for all salaried individuals
C) Simplification of capital gains tax structure
D) Complete removal of corporate tax

Tap here for Answer

Answer: C) Simplification of capital gains tax structure

Explanation:

The government introduced a new capital gains tax framework to make taxation simpler for investors in equity, real estate, and other asset classes.
The aim is to remove multiple tax rates and holding periods to create uniformity.

3️⃣ What is the significance of e-invoicing in the GST system?

A) It reduces the corporate tax rates
B) It ensures businesses do not have to pay GST
C) It increases transparency and prevents tax evasion
D) It replaces digital payments completely

Tap here for Answer

Answer: C) It increases transparency and prevents tax evasion

Explanation:

E-invoicing is mandatory for businesses with a turnover above ₹5 crore under GST.
It helps reduce fraudulent input tax credit claims and improves tax compliance.

4️⃣ Which of the following sectors is likely to be brought under GST in 2025?

A) Alcohol & Petroleum Products
B) Real Estate & Jewelry
C) Healthcare & Education
D) All of the above

Tap here for Answer

Answer: A) Alcohol & Petroleum Products

Explanation:

The government is considering bringing petroleum products (petrol, diesel) under GST, but states oppose it due to loss of VAT revenue.
Alcohol remains outside GST as it is a major revenue source for state governments.

5️⃣ How is GST collected and distributed between the Centre and States?

A) The Centre collects all GST revenue
B) GST is equally shared between the Centre & States
C) Centre collects CGST, while States collect SGST
D) States have no role in GST collection

Tap here for Answer

Answer: C) Centre collects CGST, while States collect SGST

Explanation:

GST has a dual structure – Central GST (CGST) & State GST (SGST).
For intra-state sales, CGST goes to the Centre and SGST to the State Government.
For inter-state sales, Integrated GST (IGST) is collected and later distributed between the Centre & the State where consumption occurs.

🚀 Conclusion

The 2025 tax reforms & GST decisions focus on simplifying tax structures, increasing compliance, and resolving disputes faster. Key reforms include GST rate rationalization, capital gains tax changes, and e-invoicing mandates. The government is also considering bringing fuel under GST, but political opposition remains.