GST 2.0 — the big reveal that will make essentials cheaper and simplify taxes
India is set to witness a significant tax reform this September. The GST Council has cleared what is being called GST 2.0, a simpler, consumer-friendly version of the tax system. The new structure will kick in from September 22, 2025, which is the first day of Navratri.
This reform, called the “Next-Gen GST”, is designed to make life easier for households, farmers, and businesses while also boosting the Indian economy.
Changes
The current GST structure has four tax slabs – 5%, 12%, 18% and 28%. Some items are taxed higher than others and there is not much clarity for this. The new system will have only two main slabs – 5% and 18%.
While the 12% and 28% categories are being removed, a new 40% slab will be applied to keep luxury and harmful products, such as luxury cars, pan masala, tobacco, and aerated drinks, in check.
In short, everyday items will get cheaper, while luxury goods will cost more.
Why is this important?
The government’s goal is to decrease the tax on the majority of everyday items and to make GST easier to understand. Families will save more, insurance will become more affordable, and consumer demand is predicted to increase as a result of lower taxes on necessities.
What gets cheaper under GST 2.0?
The tax rate will be reduced from 12–18% to 5% for everyday necessities like butter, ghee, cheese, jam, jellies, biscuits, pastries, even ice cream, shampoo, soap, toothpaste, and hair oil. This action provides middle-class households with much-needed relief.
In the interest of health and safety, life and health insurance policies will no longer be subject to GST, which will lower premium costs. In order to reduce expenses for patients and their families, diagnostic kits, thermometers, medical oxygen, and glucometers will all be moved to a 5% slab.
Another significant category that will profit is cars. Previously subject to 28% GST, small cars and bikes will now only be subject to 18% tax. Ambulances and three-wheelers will also become more reasonably priced. Electric cars will remain the least expensive option on the road thanks to their 5% rate.Electronics and consumer goods will also see price cuts.
Previously subject to a 28% tax, televisions, air conditioners, and dishwashers will now only be subject to an 18% tax. Even cement has been reduced to 18%, which has boosted housing and real estate. Notebooks, maps, pencils, and crayons will no longer be subject to taxes for students.
What will cost more?
Some products will move into the new 40% luxury slab, even though the majority of goods and services are getting cheaper. These consist of private planes, yachts, motorbikes larger than 350cc, and big SUVs. Taxes on goods like tobacco, pan masala, gutkha, and caffeinated or aerated beverages will also increase.
The bigger picture
The purpose of GST 2.0 is to give the general public more money. They receive discounts on school supplies, groceries, personal care products, and insurance premiums. The cost of cars, motorcycles, electronics, and even cement will decrease, lowering the cost of homes and necessities.
However, the reform only maintains a higher tax on harmful and luxury goods like SUVs, pan masala, and carbonated drinks. The system remains equitable in this manner. It eases the burden on everyday living and ensures that luxury goods carry a heavier load.
The action is anticipated to increase demand and consumer spending for the economy. Businesses and consumers alike will find it easier to comprehend and adhere to GST since there are only two primary tax slabs.
The general public benefits from GST 2.0, which is a step in the direction of a more robust and straightforward tax structure.
