FM Sitharaman: First Time in Independent India That Income Tax & GST Taxes Slashed Together - CAclubindia

Finance Minister Nirmala Sitharaman on 5th Dec 2025, Friday, said that the Modi government has created history by delivering deep cuts in both direct and indirect taxes within the same financial year, something she said has never happened before in independent India.

Addressing lawmakers in the Lok Sabha, the minister stated, "At no point in India's independent history have both direct and indirect taxes been reduced so significantly within a single year." She added that earlier governments had subjected citizens to "absurd levels" of taxation, with income tax rates once touching as high as 95%.

Major Income Tax Relief Under Union Budget 2025

The Union Budget 2025 introduced sweeping changes to the personal income tax structure under the new tax regime, which is now the default system. Individuals with a total income of up to Rs 12 lakh now have zero tax liability, thanks to an enhanced rebate and higher standard deduction.

The government also expanded income brackets in the new regime and lowered tax rates for key middle-income categories. Sitharaman earlier confirmed that these reforms would result in the Centre foregoing nearly Rs 1 lakh crore in direct tax revenue, underscoring the scale of relief offered to taxpayers.

GST Overhaul Reduces Tax Burden on Common Goods

Alongside direct tax cuts, the government implemented one of the most significant GST rate rationalisations since the tax was introduced. In September, the GST Council shifted from four tax slabs to two, 5% and 18%, placing most mass consumption items in the lowest bracket.

A higher 40% GST rate was introduced only for luxury and sin goods. Popular items such as air-conditioners, televisions, small cars and motorcycles saw their tax burden slashed from 28% to 18%, making them more affordable for consumers.

Government Ready to Sacrifice Fiscal Space, Says FM

Sitharaman emphasised that while it is the duty of any finance minister to raise revenue, the Modi government has chosen to surrender significant fiscal space in the interest of public welfare.

"Here is a government that has already given up significant fiscal space in many ways, with two major steps taken within just one year," she said.

With major relief provided through both income tax and GST reforms, the government has positioned these changes as part of its broader effort to increase disposable incomes, support consumption and simplify India's tax landscape.