Historic Reform in Indirect Taxation
New Delhi, Sept 4: The GST Council, in its 56th meeting that stretched over 10 hours, approved the biggest reform since the rollout of the Goods and Services Tax in 2017. The new “GST 2.0” model will now operate with only two primary slabs—5% and 18%—with a special 40% rate reserved exclusively for luxury and sin goods.
Cheaper Essentials, Relief for Middle Class
Union Finance Minister Nirmala Sitharaman announced that the new rates will be applicable from September 22, the first day of Navratri. The changes bring sweeping tax cuts across essential and daily-use goods. Packaged food items such as juices, cheese, pasta, coconut water, and sausages will move from 12% to 5%. Medical supplies like oxygen, bandages, and diagnostic kits will also get cheaper. Basic food products like paneer, roti, khakra, and pizza bread will now attract zero GST.
Common household products such as soaps, shampoos, toothpaste, and kitchenware have also been shifted to the 5% slab. White goods, including air conditioners, televisions, and dishwashers, will see their GST fall to 18% from 28%.
Automobiles & Insurance Gains
Small cars (under 1200cc petrol/1500cc diesel) and motorcycles below 350cc will now be taxed at 18%, down from higher brackets earlier. However, bigger cars and SUVs will attract a steep 40% tax. In a major relief to families, life and health insurance premiums will now be fully exempt from GST.
Industry & Government Response
Prime Minister Narendra Modi called the reform “pro-people and pro-growth,” highlighting its benefits for farmers, MSMEs, and middle-class households. Industry bodies like CII welcomed the move, promising to pass benefits directly to consumers.
While some states raised concerns over revenue losses, the Centre pegged the fiscal impact at around ₹48,000 crore, calling it “sustainable.”
With GST 2.0, India has taken a decisive step towards simplifying taxation, reducing litigation, and easing compliance for businesses and individuals alike.
