GST, income tax, labour laws: A look at India’s biggest reforms in 2025
2025 is being seen as a year in which the National Democratic Alliance (NDA) government, led by Prime Minister Narendra Modi, pushed through a series of reforms aimed at making the Indian economy more resilient amid global uncertainty.
India’s economy grew 8.2% in the second quarter of the year, exceeding estimates, supported by policy changes across taxation, labour, Ministry of Micro, Small and Medium Enterprises (MSMEs), energy, foreign investment, and the legal framework.
GST 2.0
One of the biggest changes was the September rollout of GST 2.0, the most significant overhaul of the Goods and Services Tax (GST) since its launch in 2017. The earlier four-rate structure was replaced with a simpler two-rate system of 5% and 18%, while select items were placed under a 40% slab.
The changes lowered compliance complexity and reduced costs for consumers. Rate rationalisation also supported consumption, with Diwali sales touching Rs.6.05 lakh crore. GST revenues in the fiscal year 2025-26 (FY26) are expected to exceed budget estimates.
Income Tax Reform
The Union Budget introduced income tax relief for the middle class by removing tax liability for individuals earning up to Rs.12 lakh annually. Alongside this, the old income tax framework, which had over 4,000 amendments, 819 sections, and more than 5 lakh words, was replaced by a new Income Tax Act with 536 sections and about 2.6 lakh words.
Labour Reform
Labour reforms were another key pillar, with 29 laws consolidated into four labour codes. These reforms focused on wages, industrial relations, social security, and workplace safety, while also aiming to improve female workforce participation and reduce unemployment.
A major change allows businesses with fewer than 300 workers to carry out layoffs and closures without prior government approval, compared with the earlier threshold of 100 workers.
MSME Reform
The MSME definition was revised to allow higher investment and turnover limits. For micro enterprises, the investment limit was raised from Rs.1 crore to Rs.2.5 crore and turnover from Rs.5 crore to Rs.10 crore.
