In a nation long burdened by a complex web of taxes, the 2025 GST rate reduction and rationalisation, dubbed GST 2.0, marks a pivotal moment in India's economic journey. Effective from September 22, 2025, this landmark reform, unveiled at the 56th GST Council meeting, where all states unanimously accepted it, slashes tax slabs to two (5% and 18% with a 40% slab for sin goods), exempts essentials and simplifies compliance. Even as global trade faces headwinds thanks to myopic unilateral decisions, this step, far from being a knee-jerk reaction, reflects a much deliberated and planned strategy by the Modi government to ensure domestic consumption gets a boost, delivers affordability, stimulates growth and empowers every Indian.
India's original GST framework, launched in 2017, had unified 17 central and 13 state levies into a single tax, creating a seamless national market. GST 2.0 now reduces taxes on about 175 items—from shampoo, toothpaste, bicycles to TVs and small cars, while exempting milk, paneer and roti completely. GST 2.0 is a boon particularly for the Kisan, Naari, Naujawan and Aam Admi (middle class). For the common man, tax cuts on daily essentials and bringing down items of daily consumption from 12% to 5% and exemptions on health insurance, life insurance and 33 life-saving drugs (e.g., cancer medicines) will hugely slash household expenses. A simple pre-GST and post-GST tax incidence on various household goods shows a general reduction in the cost of items, leading to an average 4% monthly savings for households. Items like wheat, rice, lassi, butter milk and kerosene lanterns saw taxes drop from 2.5-8% to 0-5%. Footwear (up to Rs. 1,000), LED and tableware/kitchenware taxes decreased from 10-28% to 5-12%. Hair oil, toothpaste, soap, cosmetics, detergents, polishes, baths, sinks and furniture taxes reduced from 17-28% to 12-18%. High-value items like TVs, refrigerators, washing machines, and electrical appliances saw taxes fall from 31.3% to 18%. Movie tickets (above Rs. 100) and mobile phones dropped from 18-35% to 12-18% while spices and vegetable edible oils decreased to 5%. Notably, sanitary pads, previously taxed at 12% are now exempt under GST 2.0, making them more affordable. Essentials like milk and paneer are tax-free. Education becomes affordable with notebooks, pencils and books at 0% GST, saving families thousands annually. Agriculture, employing 45% of India's workforce, benefits immensely. GST on fertilizers, bio-pesticides, tractors and drip irrigation systems drops to 5% lowering production costs and boosting incomes. Exemptions on loose grains like rice and wheat ensure affordability, while tax cuts on handicrafts and textiles create rural jobs.
Construction materials like cement (19-20% pre-2014 to 18% in 2025), steel (19.5% to 18%), bricks (15-18% to 5%), sand (10-15% to 5%), and marble/granite blocks (18-20% to 12%) have seen tax reductions too. This could cut building costs by 3-5% benefiting affordable housing. All in all, your first house, first car or bike and daily items are set to get cheaper - this will ensure Ease of Living & Affordability.
MSMEs are the backbone of India's economy, and these gain from simplified rules and corrected inverted duty structures, freeing up capital and driving job creation.
GST 2.0 introduces tech-based, time-bound registration processes, especially for MSMEs with pre-filled returns and faster refunds. Appeals will feature online filing, standardised timelines (3 months, extendable by 1 month) and mandatory pre-deposits, reducing disputes and enhancing compliance efficiency. The broader economy also benefits from a consumption surge of about ₹5.31 lakh crore by GST 2.0 (1.6% of GDP) when combined with income tax relief (₹12 lakh exemption)—fueling demand for FMCG and auto sectors. Lower inflation (4.3% in FY25) and RBI rate cuts will further stimulate investment, ensuring inclusive growth across urban and rural India. So this ensures EASE OF DOING BUSINESS.
The timing of this reform is critical but only incidental. With US tariffs threatening 5% of our exports, GST 2.0's projected ₹1.98-3 lakh crore consumption boost, as per SBI and HSBC, will be a lifeline. As global growth slows (IMF: 2.8% in 2025), GST 2.0's demand revival and 1-1.2% GDP boost are essential to sustain India's 6.5–7% growth trajectory, making it a reform perfectly aligned with today's global economic challenges.
Viewing GST 2.0 as a mere well-timed political move would be incorrect. GST 2.0 reflects the Modi government's appetite to stitch good economics with good politics. Since 2019, FM Nirmala Sitharaman has transformed India's economy, turning the “fragile five” into the world's fastest-growing major economy. Her achievements contrast starkly with the pre-2014 UPA era of 9.4% inflation, policy-paralysis-ridden, slow-growing economy marred by corruption, NPAs and bad loans in the banking sector.
Under FM Nirmala Sitharaman, many items that saw VAT as high as 24-26% are now down to 0-5% or 18%! FM has been able to keep inflation at a low, ensuring that on one hand, per capita incomes rise and on the other hand, purchasing power doesn't decline. CPI was at just 2.1% in June 2025, down from 10.9% in 2012–13. Gross NPAs under FM Sitharaman are at 2.8% (March 2024), a 12-year low, enabling credit access. Far from being dead, the Indian economy outperformed with a 7.8% GDP growth rate. Exports hit a high of $824.9 billion in FY25, with defence exports up 34 times. Manufacturing PMI is at 58.4 (June 2025), the highest in a long time. S&P recently upgraded our credit rating, once again highlighting the resilience and strong fundamentals of our economy since 2014.
The opposition's stance on GST 2.0 is, however, a masterclass in hypocrisy. The Congress, which stalled GST under UPA, labelled it a “disaster” in 2017 (PM Manmohan Singh said that) and a “brutal tool” in 2025 (by Rahul Gandhi), now claims the two-slab structure is its brainchild. Rahul Gandhi's flat 18% GST proposal, suggested by him on many occasions, would have taxed rice and medicines at 18% while cutting rates on luxury goods!
Some opposition states are now trying to drill the narrative of “revenue loss”, but facts state a different picture. Karnataka, Kerala, Tamil Nadu and Jharkhand saw state tax revenues rise 1.3-1.5 times post-GST (FY 2024-25) compared to pre-GST VAT/sales tax. Add to this the compensation paid and higher share via tax devolution and grants.
All in all, GST 2.0 is a bold leap toward Viksit Bharat. For businesses, GST is now a Good and Simple Tax, and for the common man, it is Great Savings & Taxes Lowered! Those who called it the Gabbar Singh Tax are now forced to eat humble pie.
(The author is a national spokesperson of the BJP)
Disclaimer: These are the personal opinions of the author
