By Manisha Sahu, America News World
September 22, 2025
New Delhi, September 22, 2025 — India has ushered in its most sweeping Goods & Services Tax (GST) overhaul since the system’s inception in 2017. The much-anticipated reforms, now known as GST 2.0, came into effect today, the first day of Navratri, with the government slashing GST slabs across many categories and simplifying the tax structure. Prime Minister Narendra Modi has termed the rollout of GST reforms a “savings festival”, promising lower costs and “brighter smiles in every home.”
What Has Changed ?
The previous four main GST slabs — 5%, 12%, 18%, and 28% — have largely been replaced by a two-rate system of 5% and 18% for most goods and services.
A new higher “sin & luxury” slab at 40% has been introduced for certain goods and services considered non-essentials, luxury, or harmful (often referred to as “sin goods”).
Some essential items are now taxed at a nil or zero GST rate.
What Gets Cheaper (and What Gets Costly)
Consumers will see relief in many everyday items:
Daily staples — bread (roti, paratha), paneer, packaged snacks, “namkeen,” UHT milk, etc. Many of these have been shifted to 5% or even 0% GST.
Consumer durables and appliances — categories like air conditioners, refrigerators, washing machines, TVs etc., which earlier attracted 28%, now move to 18%.
Automobiles and vehicles — small cars (petrol under 1200 cc, diesel under 1500 cc), motorcycles up to a certain engine displacement, etc., get tax reduction moving from earlier higher slabs to 18%.
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But not everything gets cheaper:
Items now under the 40% slab include luxury goods, high-capacity/engine vehicles, sin goods like cigarettes, pan masala, carbonated drinks, and other non-essentials. These saw either a hike or maintained heavy taxation.
Some apparel priced above certain thresholds may now attract 18% GST rather than the lower slab they previously fell under.
Why Now & What the Government Says
The reform aims to simplify taxation, reduce complexity & compliance burden for businesses, and to lower the cost of living for middle- and lower-income households.
Prime Minister Modi has emphasized that these cuts—along with earlier income tax changes—are expected to deliver savings of roughly ₹2.5 lakh crore to citizens.
Key relief is targeted at essential sectors: food, health, daily consumer goods. Health insurance premiums are now exempted from GST. Life-saving drugs in many cases will attract nil or lower rates.
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Potential Impacts & Challenges
Consumer demand is expected to rise, especially for items with large price reductions. The timing—launching during the Navratri festival—may boost festive consumption and retail sales.
For manufacturers and retailers, pricing systems, e-invoicing, billing software and inventory classification will need updates to reflect the new rates.
The government will need to balance revenue shortfalls from the rate cuts with increased revenue from the 40% slab and higher volumes of taxed goods sold.
What This Means for You
If you buy daily use goods—groceries, food staples, household items—you will pay less.
Big-ticket consumer purchases (electronics, small cars, appliances) are now more affordable.
If you consume or purchase luxury items, “sin goods,” or high end vehicles, costs may remain high or increase.
Conclusion
India’s GST 2.0 is a bold step toward simplifying its indirect tax system, easing financial burdens on households, and stimulating economic activity ahead of key festivals and spending seasons. While not without its trade-offs, the reforms promise to deliver visible relief in everyday life. As with all major tax overhauls, implementation and clarity in execution will be critical. For consumers, the message is clear: from roti to refrigerators, things are getting cheaper—though luxuries will still carry their premium.
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