The GST 2.0: A Much-Awaited Tax Reform Since 2017

1st July 2017 was a historic date for India. That was the very day when India’s biggest tax reform, the Goods and Services Tax (GST), came into effect. It was a massive change, and most importantly, a bold initiative by the honorable Prime Minister Narendra Modi to create a single national market.

However, the multi-slab GST structure was very confusing. Which is why, for years, there has been a buzz about creating a new, simplified tax system.

And it finally happened a few days ago! The 5th GST council meeting has brought us the much-coveted GST 2.0. The new GST rates in India promise to simplify the tax structure and ease the financial burden on the average Indian family. This is probably one of the biggest news stories that has brought so much momentum among Indian citizens after the 2016 demonetization.

Which Items Will Get Cheaper?

Initially, the GST rate structure in India had four slabs: 5%, 12%, 18%, and 28%. However, the new system has simplified the whole thing. Now, it is just two slabs: 5% and 18%.

And the new GST structure has made a lot of daily household items cheaper. Let’s take a closer look-

Milk, paneer, and Indian breads such as roti, chapati, and paratha havehas become tax-free. Their GST rates went down from 5% to 0%.

Items taxed at 12% or 18% like namkeen, bhujiya, sauces, instant noodles, coffee, ghee, butter, and chocolates, etc., went down to the 5% slab. 

Goods such as air conditioners, televisions over 32”, dishwashers, monitors, and projectors have been shifted from the 28% slab to the 18% slab. This reveals that the government is focusing on making high-ticket items more accessible to middle-class families.

Small cars (under 1200cc), motorcycles under 350 cc, now sit at the 12% rate, which was 28% beforehand! This is a sign that the updated GST on goods and services aims to directly make living more affordable.

All kinds of auto parts have been brought to a uniform 18% GST rate.

The GST for buses, trucks, and ambulances has been slashed from 28% to 18%.

Many medicines and life-saving drugs have been reduced from 12% to 0%. The same applies to three critical drugs for cancer and chronic diseases, which have been reduced from 5% to a 0% GST slab.

The rates of items like tractors, farming machinery, specified bio-pesticides, and natural products have been reduced from 12% to 5%.

Cement, a key ingredient for the construction business, has also been brought down from 28% to 18%. This will be especially beneficial for the impact investment market, as it would enable investors to fund large-scale projects.

The new GST rate list in India will benefit the average Indian household the most. Hence, the new rates are surely expected to bring some positive changes in the future! Take a look at the detailed list of items here.

Which Items Will Get Costlier?

The present government’s philosophy is quite clear from the new tax reform policy- to make essentials affordable, and make sure that non-essential items contribute more to the treasury!

And that’s why the highest GST rate in India has now been set at 40% for all luxury goods, items, and services.The new GST 2.0 has made a variety of luxury and ‘sin’ goods even more expensive. Items like soft drinks, non-alcoholic drinks, and beverages with added sugar or flavoring have jumped from the 18%- 28% slab, and have now reached the 40% slab.

Not just drinks and beverages, but the updated tax structure in India will also impact luxury vehicles. Automobiles with an engine capacity over 1,200 cc and longer than 4,000 mm; motorcycles over 350 cc; personal yachts; aircraft; and racing cars sat at the 28% tax slab previously. However, the reformed rate has put them on the 40% slab!

Certain leisure activities in the service sector have also been hit with a higher tax rate. For instance, services from race clubs, leasing and rentals, casinos, gambling, horse racing, and even online money gaming will now sit at the 40% GST slab.

Not just that, but tobacco products will be categorized as ‘sin’ products from now on. The current GST rate in India for these products is 28%, along with a compensation cess. This will eventually be replaced with a 40% GST. This is a clear signal that the government deliberately wants to levy heavy taxes on products that are considered to be harmful to society. The present GST rate in India on these goods, for now, remains the same.

When are the New Rates Getting Implemented?

The new GST rates in India will be implemented from Navratri, September 22, 2025. This means the middle-class consumers can officially feel relieved during the Pujas! This is a well-timed move, as it coincides with the beginning of the festive season in India. The government aims to make sure that consumers experience and benefit from the new rates as soon as possible, especially during the festive period.

Why so? That’s because the consumption during that period increases substantially. This will bring immediate relief and help millions of middle-class households to save more.

GST 2.0: A Boon for the Middle-Class

Since the price cut will affect the daily household essentials, it will eventually help the average Indian household to save more. That’s exactly why the new tax reforms are looking so positive already!

Moreover, the reduction in taxes on high-value goods like small cars and consumer durables will make them more attainable. This will improve the quality of life for many families and give a boost to the economy. The GST 2.0 is a clear sign that the government has listened to the people and is actively trying to create a fairer, simpler, and more transparent tax system.

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F.A.Qs

1. What is the new change in the GST rate?

Formerly, the GST structure was based on four slabs- 5%, 12%, 18% and 28%. The reformed GST structure is based on just two main slabs- 5% and 18%. And for luxury or ‘sin’ items, the GST has been fixed at 40%.

2. What are the 4 stages of GST?

The Indian GST framework is based on four different GST types- Central GST (CGST), State GST (SGST), Integrated GST (IGST), and Union Territory GST (UTGST).

3. How to reduce GST from the price?

If you want to reduce GST from the price, divide the GST-included price by (1+GST rate/100). This will give you your base price, which you have to subtract from the total price.

4. Which country has the highest rate of GST?

Currently, with a 28% rate slab, India stands as one of the countries with the highest rate of GST.

5. What is the GST new slab?

The GST structure has been simplified and changed to three core slabs- 0%, 5%, and 18%. A 40% GST has been fixed for luxury items.

Amilia Brown

Amilia Brown is a seasoned business writer & strategist who simplifies complex business concepts and turn them into engaging narratives. As a trusted business writer, she delivers actionable insights with precision.