India’s 2025 Reform Revolution: GST Reset To Labour Codes And Global FTA

2025 will be remembered as the year India consciously chose to think bigger, move faster, and reform deeper. Under PM Modi, it became a defining moment when the country shed layers of outdated laws, simplified its tax and regulatory structures, opened new frontiers for industry, and aligned governance with the aspirations of a confident nation.

It was a year when India’s economic philosophy shifted toward clarity, scale, and global ambition. The impact was felt across rural India, industry, labour markets, and the emerging sectors that will shape the future.

Surpassing every global estimate, the Indian economy showed a staggering 8.2% GDP growth in 2025. It was the result of breathing new life into the economy through landmark reforms, cutting across sectors from taxation to labour reforms, from port modernisation to nuclear energy, from FDI to FTAs along with significant deregulation.

2025 marked the first year when the Labour Codes reshaped India’s world of work in a visible and decisive way. By consolidating 29 fragmented laws into four modern codes, India created a labour framework that is clearer for businesses and more secure for workers.^[1]

With a stronger focus on fair wages, smoother industrial relations, wider social security and safer workplaces, the reforms position the labour market to support a growing workforce of 64.33 crore, encourage higher female participation and sustain lower unemployment levels as the economy expands.

India’s GST system saw its most meaningful simplification in 2025, moving to a clean two-slab structure of 5% and 18% that eased the burden on households, MSMEs, farmers and labour-intensive sectors. The reform aimed to reduce disputes, improve compliance and strengthen digital oversight while keeping sin goods outside the new structure to maintain fiscal balance. The impact was visible in consumer sentiment, with India recording record Diwali sales of Rs 6.05 trillion and witnessing its strongest Navratri sales in over a decade.

SBI Research now projects that even with lower slabs and rationalisation, GST revenues in FY26 are expected to exceed budget estimates. This reinforces the view that a simpler tax regime can be both people-friendly and fiscally strong, positioning India on a path toward a clearer, more predictable and growth-oriented indirect tax framework.

2025 brought a transformative shift for India’s middle class with an income tax framework that finally reflected the realities of modern household budgets. For the first time, individuals earning up to Rs 12 lakh a year faced no income tax at all, creating meaningful savings and giving families the financial space to plan, invest and spend with greater confidence.

Simultaneously, India replaced the old Income-tax Act of 1961, burdened with 4,000+ amendments and thousands of complexities, with the modern, simplified Income Tax Act, 2025. The new law rationalises exemptions, reduces litigation, improves clarity, and strengthens voluntary compliance. It represents a decisive break from colonial-era drafting and signals India’s entry into a new era of transparent, technology-driven tax administration.

The Monsoon Session of Parliament witnessed the passage of five landmark maritime legislations: the Bills of Lading 2025, Carriage of Goods by Sea Bill 2025, Coastal Shipping Bill 2025, Merchant Shipping Bill 2025, and the Indian Ports Bill 2025.

These laws modernise India’s maritime governance, replacing Acts from 1908, 1925, and 1958. The reforms ease documentation, reduce disputes, encourage coastal shipping, lower logistics costs, strengthen port governance, and position India to grow its blue economy. With faster wreck removal, better maritime safety, and empowered state maritime boards, India now has a 21st-century maritime framework aligned with global standards.

The Ease of Doing Business reforms defined 2025 as a year of breaking barriers. A sweeping review of Quality Control Orders removed mandatory compliance for 76 product categories and identified over 200 for deregulation, lifting a major burden off MSMEs and exporters.

Letting Small Companies Think Big

Expanding the definition of “small companies” to include firms with turnovers up to Rs 100 crore reshaped the landscape for thousands of Indian enterprises. The reform created an environment where growing businesses no longer felt constrained by administrative hurdles, but instead were encouraged to scale with confidence and compete on a larger stage.

A New Definition for Bigger MSME Ambitions

The MSME definition overhaul (effective April 1, 2025) removed a structural bottleneck that had discouraged scaling. Enterprise investment and turnover thresholds were raised 2.5-fold and doubled respectively:​

●      Micro enterprises: Investment limit raised Rs 1 cr → Rs 2.5 cr and turnover limit Rs 5 cr → Rs 10 cr

●      Small enterprises: Investment limit raised Rs 10 cr → Rs 25 cr and turnover limit Rs 50 cr → Rs 100 cr

●      Medium enterprises: Investment limit raised Rs 50 cr → Rs 125 cr and turnover limit Rs 250 cr → Rs 500 cr

This will enable enterprises to expand without losing MSME benefits and incentives, creating a longer runway for growth and enabling medium-tier firms to remain competitive globally while retaining access to government support structures.

The Modi Government also did significant reforms in FDI by allowing 100% FDI in Indian insurance companies and will attract substantial foreign capital, enhance competition, and improve customer services within India’s growing insurance market.

India strengthened its economic future through strategic trade agreements.

The India–UK CETA signed in July and India–Oman CEPA signed recently expanded duty-free access for Indian goods to Western and Gulf markets, reinforcing India’s role as a global trade hub. India also finalised an FTA with New Zealand, eliminating tariffs across all its tariff lines and granting duty-free access to Indian exports.

In October, India operationalised its FTA with the European Free Trade Association which includes Switzerland, Norway, Iceland, and Liechtenstein, the first FTA with developed European economies. The agreement includes a binding $100 billion investment commitment over 15 years, major tariff cuts, and new opportunities in services, technology, and green energy. Negotiations are at advanced stages with the European Union, Mexico, Israel, Canada, and the Gulf Cooperation Council.

This combined with the recently announced Rs 25,000 crore export promotion scheme will strengthen India’s position in international trade, accelerate progress toward the USD 1 trillion export target, and further the vision of Aatmanirbhar Bharat.

In a landmark move to unify India’s securities market laws into single code, Securities Market Code Bill has been introduced which will strengthen governance norms, expand consumer protection, reduce compliance burden and support technology driven securities market.

The Jan Vishwas reforms reshaped how government and business interact. Over 200 minor offences were decriminalised, hundreds of outdated laws were scrapped, and with the Jan Vishwas 3.0 to be introduced soon, this transformation has entered a new, deeper phase.

This shift is not just legal but cultural; it signals to entrepreneurs that the system is now built to support, not intimidate. And when seven NDA-governed states together decriminalised more than 1,000 provisions, the reform evolved into a truly national movement.

The Parliament passed the SHANTI (Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India) Bill. It is historic because it marks the first time India is structurally shifting its nuclear policy from a closed, state-monopoly model to a carefully regulated, safety-first but investment-friendly framework, repealing the old Atomic Energy Act, 1962 and subsuming the Civil Liability for Nuclear Damage Act, 2010 into a unified, modern law. By explicitly allowing private and foreign participation in designated civilian nuclear projects, while keeping the strategic fuel cycle, enrichment, reprocessing and weapons domain firmly under government control, it opens the door to capital, technology and next‑generation reactors at a scale the public sector alone could not achieve.

2025 was a defining year of structural reform in India. The Modi government shifted governance toward clarity, equity, and future-readiness, delivering dignity to workers, historic tax relief to the middle class, and greater ease of doing business.

With simpler laws, stronger systems, softer inflation, and rising global credibility, these reforms lay the foundation for India’s march toward Viksit Bharat 2047, built on transparency, prosperity, and opportunity for all.

2025 marked a shift in rural development with the new Viksit Bharat- G RAM G Bill, 2025 Rozgar Guarantee framework, which raises guaranteed work from 100 to 125 days and directs it toward strengthening village infrastructure and livelihoods.

By linking employment with local development plans and using digital systems for transparency, the reform aims to turn rural work into a driver of higher incomes, better assets and more resilient communities, moving it beyond relief toward long-term growth.

The Bharatiya Nyaya Sanhita (BNS) 2023, which took full effect in January 2025, replaced India's Indian Penal Code (1860), a colonial statute governing the country for over 150 years. It is historic because it represents India's decisive break from 163 years of colonial criminal jurisprudence by completely replacing the Indian Penal Code (IPC) of 1860.

It has expanded coverage to address 21st-century threats like cyberterrorism, organized crime syndicates, economic sabotage, and gender-based violence with specific, stringent provisions, marking the first time India's criminal law explicitly recognizes digital evidence, mandates e-FIRs, and enforces mandatory timelines for trials.