@ BR Bureau
In a landmark decision, the GST Council has approved a sweeping reform of India’s indirect tax regime, simplifying the existing multi-tier system into four broad slabs: 0%, 5%, 18% and 40%. The move, dubbed “GST 2.0,” is aimed at reducing complexity, easing consumer burden, and driving economic growth.
Under the new structure, essential goods and services such as food items, soaps, and health and life insurance fall under the 0% or 5% category, directly lowering household expenses. Consumer durables and automobiles, earlier taxed at 28%, now move to 18%, making appliances, two-wheelers, and small cars significantly more affordable. Building materials like cement and bricks also face lower rates, a change expected to stimulate the housing and construction sectors.
At the other end, a steep 40% slab has been introduced for luxury and sin goods, including tobacco products, aerated drinks, high-end cars, and yachts, both to curb consumption and secure government revenue.
Economists predict that the reform could reduce retail inflation by up to 1.1 percentage point, boosting disposable incomes and spurring demand in retail, FMCG, and real estate. The MSME sector is also set to benefit from simplified compliance, faster refunds, and lower input costs. Agriculture and rural economies will see gains through reduced taxation on fertilizers, tractors, and irrigation tools.
However, revenue concerns persist. The Centre estimates a ₹48,000 crore shortfall, raising questions about how states will balance their budgets without additional compensation mechanisms. While industry leaders have largely welcomed the reform as a pro-growth, pro-consumer measure, some experts warn that fiscal pressures could limit long-term benefits.
Overall, GST Reform 2025 is being hailed as a bold step towards a transparent and consumption-driven economy, marking a new chapter in India’s tax landscape.
