New Delhi
The rollout of GST 2.0 from Monday, September 22, 2025, marks a major overhaul of India’s indirect tax system, aiming to simplify compliance, rationalize rates, and boost household consumption. Termed the “GST Bachat Utsav” by Prime Minister Narendra Modi, the reforms restructure slabs to leave more disposable income in the hands of consumers while addressing issues like classification disputes and the inverted duty structure.
Under the new system, most goods and services now fall under two main rates—5% and 18%—with a demerit 40% rate for sin and ultra-luxury items. Tobacco and related products continue in the 28% plus cess category. Essentials such as Indian breads, daily use items like toothpaste, soaps, shampoos, biscuits, ghee, condensed milk, apparel, and footwear under certain price points now attract 5% GST. Aspirational goods including air conditioners, large TVs, refrigerators, dishwashers, and small cars have seen a reduction from 28% to 18%, making them more affordable. Insurance premiums, previously taxed at 18%, are now fully exempt, encouraging wider adoption of life and health coverage.
Luxury and demerit items including diamonds, precious stones, tobacco, pan masala, and alcohol remain highly taxed, while petroleum products continue outside GST.
For businesses, GST 2.0 streamlines registration, returns, and refunds, particularly aiding small enterprises and startups. Pre-filled returns, automated refunds, and provisional sanction of 90% refunds for inverted duty structure cases are expected to ease cash flow. While some inversion issues remain in sectors like bicycles, textiles, and corrugated boxes, the reforms overall simplify the tax regime and aim to balance benefits for consumers and industry alike.
