In a landmark move dubbed “GST 2.0”, the 56th GST Council meeting (chaired by FM Nirmala Sitharaman on September 3, 2025) approved sweeping reforms to rationalise India’s indirect
In a landmark move dubbed “GST 2.0”, the 56th GST Council meeting (chaired by FM Nirmala Sitharaman on September 3, 2025) approved sweeping reforms to rationalise India’s indirect tax structure. The complex four-slab system (5%, 12%, 18%, 28%) is being replaced by two core rate slabs—5% and 18%—along with a new 40% “sin/luxury” rate. The changes will take effect from September 22, 2025, the start of Navratri.
This goes beyond rate cuts: The Council also agreed on reforming compliance systems, reducing duty inversion (e.g. in textiles, footwear), automating refunds, simplifying registration, and launching a GST Appellate Tribunal by end-2025.
| Category | Old Rate(s) | New Rate | Notes |
|---|---|---|---|
| Essentials (food, hygiene, medicine, etc.) | 5/12/18% | 0–5% | E.g. paneer, roti → nil; toothpaste → 5% |
| Industrial, durable goods | 28% | 18% | ACs, TVs, cement, auto parts, small cars etc. |
| Insurance (individual) | 18% | Nil | Life & health insurance tax removed |
| Sin / luxury goods | 28% + cess | 40% | Tobacco, luxury vehicles, aerated drinks etc. |
India GST 2.0 roll-out marks the most significant overhaul of the tax since its inception. By radically simplifying slabs, slashing rates for essentials, and tightening sin taxation, the government seeks to boost consumption, streamline compliance, and enhance economic efficiency. While states seek clarity on revenue sharing, ordinary citizens and businesses are poised to reap the benefits from a lighter, fairer system.
FAQs
From September 22, 2025, which marks the start of Navratri. Certain sin-goods changes (like tobacco) will follow later when compensation-cess loans are repaid.
Staples like roti, paneer, UHT milk; hygiene products like toothpaste, soap, shampoo; medical items; packaged food like butter, cheese, dates; also agricultural equipment & materials.
High-end cars (above ₹50 lakh), tobacco and pan masala products, aerated sugary drinks, premium vehicles & yachts etc.
Yes. All individual health, senior citizen and life insurance policies will see nil GST going forward.
Consumers can expect lower prices on essentials and moderately priced goods; however, states may lose revenue (~₹ 48,000 crore), for which compensation frameworks are under discussion.
