On 22 September 2025, India turned a corner in its tax story. The government launched GST 2.0, a bold makeover of the goods and services tax system. Gone are the many tax slabs; in their place are just two main rates — and a special high rate for luxury items. This change aims to make taxes fairer, simpler, and easier to understand for everyone.
Let’s walk through what changed, why it matters, and how it affects you and me.
What’s Changed: The Big Shifts
First, the old system — with four main slabs (5%, 12%, 18%, 28%) — has been largely replaced.
Now:
- Most goods will attract 5% — for essential or everyday items.
- For standard or non-basic goods, the rate is 18%.
- But for luxury, “sin,” or very high-end items, a 40% slab has been added.
In addition, many goods and services have been exempted — for instance, individual health and life insurance are now free from GST.
Also, lifesaving drugs and medicines have been moved to nil or very low tax rates.
Why the Change? The “Why” Behind the Reform
The government had several goals in mind. Because the earlier system was complex, it often confused both consumers and businesses.
With fewer slabs:
- Tax structure becomes simpler — fewer categories, clearer boundaries.
- It reduces ambiguities in classifying goods.
- It aims to lower the tax burden on essential items so common people benefit more.
- The government also hopes that increased spending (because things get cheaper) will offset some of the revenue loss.
However, the change wasn’t all smooth. Some states worried about revenue losses, since state governments depend heavily on GST.
What Becomes Cheaper — What Might Cost More
Because of these changes, many daily items are now taxed lower:
- Essentials like soaps, toothpaste, packaged foods, dairy items — many have shifted from 12% or higher to 5% or even nil.
- Small cars, TVs, air conditioners, building materials — many of these move from 28% to 18%.
- Luxury goods, tobacco, carbonated beverages, very big cars — these might now attract 40%.
So, if you buy a basic shirt or daily food items, you might see lower prices. But for a luxury watch, high-end car, or premium brand goods, you may end up paying more tax.
What It Means for You & Me
- Household savings: With lower tax on essentials, families can stretch their budgets more.
- Health benefits: Medicines and insurance becoming cheaper or exempt means more people may be able to afford treatment or coverage.
- Consumer behavior shifts: People may buy more of what was previously expensive, or trade up in categories that become more accessible.
- Business & compliance: Companies must reclassify products, change software, retrain staff, and ensure they apply the correct tax.
- State finances: States that lose revenue may press for compensations or adjustments.
Final Thoughts
GST 2.0 is more than just changing numbers — it’s about shifting how taxation works so that it’s simpler, fairer, and better aligned with people’s daily lives. The difference will be felt most in what we buy, where we spend, and how smoothly businesses adapt.
If you like, I can help you check which items in Delhi will become cheaper (or more expensive) under GST 2.0. Would you like me to do that?
