Eight years after the launch of Goods and Services Tax (GST), India is set to witness its most significant overhaul yet. The ‘Next-Gen’ GST reforms, coming into effect on September 22, aim to simplify tax rates, boost business efficiency, and stimulate domestic demand.The previous multi-tiered system has been streamlined into a two-slab structure: 5% for essentials and 18% for standard goods and services, while luxury items such as high-end vehicles, tobacco, and carbonated drinks remain at 40%.Benefits of GST 2.0
Cheaper goods and services increase demand and savings.
Lower costs help small businesses and MSMEs.
Two-rate system makes taxes easier to follow.
Simple rates encourage more people to pay taxes.
Helps domestic manufacturing and exports.
Better compliance leads to more revenue.
Lower costs and higher demand boost the economy.
GST exemptions on insurance and essential medicines help families.The reforms are built on seven key pillars: building on GST’s success, fairer taxation, digital filing, consumer focus, empowering MSMEs, strengthening state revenues, and boosting demand through lower taxes.Sectoral impactFood and household items: Everyday essentials like milk, paneer, Indian breads, soaps, toothpaste, and packaged foods will now attract 0-5% GST. Consumer durables such as TVs, ACs, and dishwashers will see rates fall from 28% to 18%.Housing and construction: GST on cement and construction materials has been reduced.Automobiles: Small cars and two-wheelers up to 350cc will move from 28% to 18% GST. Other vehicles and auto parts also see lower rates.Agriculture: Reduced rates on tractors, machinery, bio-pesticides, and irrigation equipment will help farmers cut costs and promote sustainable farming.Services: GST on hotel stays, gyms, salons, and yoga services will fall to 5%, benefiting consumers and boosting the service sector.Education and healthcare: School supplies like books, pencils, and erasers are now cheaper, while life-saving drugs, medical devices, and insurance premiums are either exempt or taxed at lower ratesHandicrafts and textiles: GST reductions support artisans, handicraft makers, and textile exporters.What industry experts saidRavi Patodia, Member, Bhadohi Carpet Export Promotion Council (CEPC) says, “The rates of normal consumption items have been reduced from 12% and 18% to 5% and this is a very good thing. This will provide a lot of relief to the general public. The tax burden will be reduced and inflation will also be reduced… It is a good decision considering the current tariff crisis.”Himanshu Baid, Managing Director of Poly Medicure and Council of Administration Member of the Export Promotion Council for Medical Devices (EPCMD), said, “There is a big benefit to the consumer that is going to come in… It’s a great reform done by the government, which is going to drive local consumption and also improve affordability and accessibility for many products that were out of reach for common people.”
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