The Goods and Services Tax (GST), introduced in India in 2017 amid much fanfare, was intended to revolutionise the nation’s fragmented indirect tax system into a seamless, unified framework. Billed as a game-changer for economic integration, it promised to eliminate cascading taxes, boost compliance through digital means, and foster a single national market. However, the reality has been more nuanced, with persistent complaints about complex rate structures, burdensome compliance requirements, and uneven revenue distribution between the Centre and the states.

Now, in a bold move that signals the dawn of what Finance Minister Nirmala Sitharaman has dubbed “GST 2.0", the 56th GST Council meeting has approved a sweeping overhaul, condensing the existing four-tier slab system into a primarily two-rate structure of 5 per cent and 18 per cent, alongside a new 40 per cent slab for sin goods. These changes, set to take effect from September 22, 2025, represent the most significant reform since GST’s inception, aiming to simplify taxation, stimulate consumption, and address long-standing inequities.

The Council’s decisions, announced on September 3, 2025, mark a departure from the incremental adjustments of recent years. The new structure eliminates the 12 per cent and 28 per cent slabs for most goods and services, reclassifying them under 5 per cent or 18 per cent. Essential items and those consumed by the masses, such as hair oil, small cars and motorcycles up to 350cc, buses, trucks, and ambulances, will see reductions in rates from 18 per cent to lower, providing direct relief to consumers and industries alike. This is complemented by zero-rating individual health insurance policies, a move that could make healthcare more accessible amid rising medical costs.

Construction materials will also benefit from lower rates, potentially invigorating the real estate sector and creating jobs in a labour-intensive industry. On the flip side, sin goods like tobacco, gutkha, pan masala, and aerated beverages will attract a punitive 40 per cent rate, reflecting a moralistic approach to taxation that discourages harmful consumption while bolstering revenues.

This rationalisation is not merely technical; it is a strategic response to India’s post-pandemic economic challenges. With private consumption lagging despite robust GDP........

© News18