GST 2.0: A New Era in Taxation

The 56th GST Council Meeting on September 3, 2025, in New Delhi marks a turning point in India’s indirect tax regime, unveiling the “GST 2.0” roadmap for a simpler, cleaner, and more growth-oriented economy. This historic session, led by Finance Minister Nirmala Sitharaman, delivers the most sweeping overhaul since GST’s inception in 2017.

Simplified GST Rate Structure

Gone are the old four major GST slabs (5%, 12%, 18%, 28%). The Council approved a rationalised system with just three rates:

• 5%: Merit rate for essentials and priority sectors such as food items, agriculture, and healthcare.
• 18%: Standard rate for most other goods and services, including household electronics and transport.
• 40%: Demerit rate for selected luxury and sin items like aerated drinks, high-end vehicles, tobacco, and certain events.

Effective Date: These changes will take effect from September 22, 2025, except for tobacco products which remain at the existing regime until compensation liabilities are cleared.

What’s Cheaper, What’s Costlier?

The Council’s robust rationalisation brings relief and clarity. Here are some major shifts:

• Daily Essentials: Shampoo, toothpaste, dairy products, and namkeens moved to 5%.
• Healthcare: Medical equipment and 33 life-saving drugs now either Nil-rated or at 5%.
• Education: Books, maps, and educational supplies exempted or Nil-rated.
• Electronics: ACs, TVs, and appliances now taxed at 18% instead of 28%, meaning direct price cuts for consumers.
• Automobiles: Motorcycles (≤350cc) and small cars moved to 18%, larger vehicles and luxury models to 40%.
• Sin/Luxury Goods: Pan masala, aerated beverages, and casinos taxed at 40%.

Impact at a Glance

Category	Old Rate (%)	New Rate (%)	Impact
Essentials	12–18	5	Cheaper
Electronics	28	18	Cheaper (8–9% drop)
Luxury/Sin	28	40	Costlier, discouraging excess
Healthcare	12–18	Nil/5	Huge relief
Education	12–5	Nil	Affordable access

Bottom Line

The GST Council’s decision rationalises the tax regime, making compliance easier for businesses and prices clearer for citizens, while simultaneously boosting domestic consumption and discouraging harmful habits. GST 2.0 is set to reshape the economic landscape as India enters the festive season in 2025 with renewed clarity, optimism, and growth-driven purpose.