The launch of GST 2.0 on 22nd September 2025 marks one of the biggest tax reforms in India since the introduction of GST in 2017. The GSt 2.0 has been prepared to simplify the tax structure, reduce compliance burdens, and make essential goods and services more affordable, GST 2.0 introduces a new three-slab system of 5%, 18%, and 40%, replacing the earlier four-tier model.
By lowering rates on essentials like food, medicines, farm machinery, and housing materials, while ensuring higher taxation on luxury and sin goods, this reform aims to boost consumption, support small businesses, and strengthen India’s economic growth. In this blog, we have provided the features, changes, and benefits of GST 2.0.
What is GST and Why is it Important?
Goods and Services Tax (GST) is a destination-based indirect tax on the supply of goods and services in India. It was launched on 1st July 2017 through the 101st Constitutional Amendment Act, 2016, with the vision of “One Nation, One Tax, One Market.”
Earlier, India had multiple indirect taxes like VAT, excise duty, and service tax, which created complexity and double taxation. GST replaced them with a unified tax system governed by the GST Council (Article 279A).
What is GST 2.0?
GST 2.0 represents the latest round of reforms in India’s indirect tax system, announced in the 56th GST Council Meeting and effective from 22 September 2025. The aim of GST 2.0 is to:
- Simplify tax slabs
- Reduce compliance burden
- Boost consumption and growth
- Support agriculture, healthcare, and MSMEs
- Improve India’s investment climate
What are the Major Features of GST 2.0?
The major features of the GST 2.0 are as follows:
| Category | Details under GST 2.0 | Earlier Rate/Status | New Rate/Status |
| Three Slab Structure | • 5% Merit/essential goods & services • 18% Standard goods & services • 40% Luxury & sin goods (tobacco, pan masala, casinos, luxury cars) | 4 slabs (5%, 12%, 18%, 28%) | 3 slabs (5%, 18%, 40%) |
| Slabs Removed | 12% and 28% abolished | 12% & 28% in use | Removed |
| Exemptions | • Life & health insurance premiums = Nil GST • Essential foods (UHT milk, paneer, bread) = Nil/5% | 5–28% depending on service | Nil or 5% |
| Healthcare Support | • 33 life-saving drugs = Nil • Cancer & rare disease drugs = Nil | 5% earlier | Nil |
| Sectoral Relief | • Farm machinery = 5% • Fertilizer inputs = 5% • Cement = 18% • Electronics (ACs, TVs, appliances) = 18% | Farm machinery: 12% Fertilizers: 18% Cement: 28% Electronics: 28% | Reduced to 5% & 18% |
| Process Simplification | • Easier registration • Faster refunds • Digital-friendly compliance • GST Appellate Tribunal (GSTAT) operational by Dec 2025 | Manual-heavy, slower refunds, tribunal pending | Digital & simplified |
How Does GST 2.0 Compare with the Previous GST System?
The details of the difference between GST 2.0 and the previous GST measures are as follows:
| Aspect | Earlier GST (2017–2025) | GST 2.0 (From 22 Sep 2025) | Impact |
| Slab Structure | 5%, 12%, 18%, 28% | 5%, 18%, 40% | Simplified |
| Luxury Goods | 28% | 40% | Becomes costlier |
| 12% Items | ~99% goods at 12% | Shifted to 5% | Cheaper |
| 28% Items | ~90% goods at 28% | Shifted to 18% | Cheaper |
| Insurance | 18% GST | Nil GST | Cheaper policies |
| Healthcare Medicines | 5–12% | Nil/5% | Affordable |
| Farm Machinery | 12% | 5% | Cheaper |
| Construction Materials | Cement at 28% | Cement at 18% | Boosts housing affordability |
What are the Sectoral Impacts of GST 2.0?
The sectoral impacts of GST 2.0 are as follows:
| Sector | Change under GST 2.0 | Expected Impact |
| Residential Construction | Cement reduced 28% to 18%, bricks/tiles 12–18% to 5% | Lower housing costs |
| Automobile | Small cars, two-wheelers, buses, trucks: 28% to 18% | Cheaper vehicles, higher demand |
| Electronics | ACs, TVs, dishwashers: 28% to 18% | More affordable consumer durables |
| FMCG & Dairy | Packaged food, biscuits, dairy: 12–18% to 5% | Boost to consumption |
| Healthcare | Life-saving drugs: 12% to Nil | Cheaper healthcare access |
| Insurance | Premiums: 18% to Nil | Affordable coverage |
| Agriculture | Tractors & inputs: 12–18% to 5% | Relief for farmers |
What are the Benefits of GST 2.0?
The benefits of the newly implemented GST 2.0 are as follows:
- Consumers
- Lower prices for essentials & durables
- Cheaper housing, vehicles, and healthcare
- Businesses/MSMEs
- Simplified compliance & refunds
- Reduced inverted duty structures
- Growth in demand
- Government
- Boost in formalization of economy
- Long-term rise in GST revenue
- Transparency in tax system
What are the Challenges in GST 2.0 Implementation?
The challenges that were being faced while implementing GST 2.0 are as follows:
- Delay in passing benefits to consumers due to old MRPs in stock
- Short-term revenue loss (~₹48,000 crore initially)
- Monitoring required to ensure businesses don’t absorb benefits
- Inverted duty issues in some niche sectors still pending
How Will GST 2.0 Affect the Economy?
GST 2.0 will affect the economy in various ways. The details are as follows:
- Inflation: Expected to fall by ~1.1% points due to cheaper essentials
- Growth: Experts expect GDP boost of 100–120 basis points
- Investment: Cheaper construction & durable goods may attract FDI
- Stock Market: Auto, FMCG, and consumer durable companies already showing positive trends
Which sectors are the main winners under GST 2.0?
The sectors that received the highest amount of benefits under GST 2.0 are as follows:
- Household essentials: Milk, paneer, bread, butter
- Healthcare & Insurance: Life-saving drugs and health policies
- FMCG Products: Biscuits, chocolates, personal care items
- Consumer Durables: TVs, refrigerators, ACs
- Automobiles: Small cars, 2-wheelers, auto parts
Are there any sectors that may face higher taxation?
Yes, luxury and sin goods such as:
- Tobacco and pan masala
- Casinos
- Luxury cars and SUVs
- Alcohol and high-end entertainment services
The 40% slab aims to discourage harmful consumption.
How will GST 2.0 help small businesses and MSMEs?
GST 2.0 will impact smaller businesses in many different ways:
- Reduced tax rates on raw materials and essentials lower operational costs
- Simplified return filing and digital compliance reduces human error
- Faster refund processing improves liquidity
- Clear tax slabs reduce litigation and ambiguity
How does GST 2.0 promote “Make in India” and sustainable growth?
Growth promotion will be carried out in various ways:
- Lower taxes on consumer durables and manufacturing inputs encourage local production
- Reduced GST on renewable energy devices promotes green energy adoption
- Affordable farm machinery and fertilizers boost agricultural productivity
Download GST 2.0 Official PDF
The official GST 2.0 PDF notification issued by the Government of India for complete details on features, slab changes, and implementation guidelines is provided below.
Key Takeaways from GST 2.0
| Key Point | Details |
| Implementation Date | 22 September 2025 |
| Slabs | 5%, 18%, 40% |
| Removed Slabs | 12%, 28% |
| Insurance | Nil GST |
| Healthcare | Nil GST on life-saving drugs |
| Cement | Reduced to 18% |
| Automobiles | Reduced to 18% |
| Farm Machinery | Reduced to 5% |
| Governance | GSTAT operational by Dec 2025 |
| Economic Impact | Lower inflation, GDP boost |
Also Check:
Questions on GST 2.0 for Bank, SSC And Other Government Exams
Q1. When will GST 2.0 come into effect?
a) 1 July 2025
b) 15 August 2025
c) 22 September 2025
d) 1 October 2025
e) 31 December 2025
Answer: c) 22 September 2025
Q2. Which GST slabs have been removed in GST 2.0?
a) 5% and 28%
b) 12% and 28%
c) 18% and 28%
d) 5% and 18%
e) None
Answer: b) 12% and 28%
Q3. What is the highest GST slab under GST 2.0?
a) 18%
b) 28%
c) 30%
d) 35%
e) 40%
Answer: e) 40%
Q4. Under GST 2.0, what is the GST rate on cement?
a) 28%
b) 18%
c) 12%
d) 5%
e) Nil
Answer: b) 18%
Q5. Which goods are included in the 40% slab?
a) FMCG goods
b) Farm machinery
c) Sin & luxury goods
d) Medicines
e) Dairy products
Answer: c) Sin & luxury goods
Q6. What is GST rate on life insurance premiums under GST 2.0?
a) 28%
b) 18%
c) 12%
d) 5%
e) Nil
Answer: e) Nil
Q7. GST Council was formed under which Article?
a) Article 270
b) Article 279A
c) Article 280
d) Article 301
e) Article 312
Answer: b) Article 279A
Q8. GST was implemented in India from which date?
a) 1 April 2016
b) 1 July 2017
c) 15 August 2017
d) 1 January 2018
e) 1 July 2018
Answer: b) 1 July 2017
Q9. Which sector benefits from reduced GST on tractors and harvesters?
a) Tourism
b) Agriculture
c) Healthcare
d) Automobiles
e) Electronics
Answer: b) Agriculture
Q10. GST on small cars under GST 2.0 is?
a) 28%
b) 18%
c) 12%
d) 5%
e) Nil
Answer: b) 18%
Q11. GST on life-saving drugs under GST 2.0 is reduced to?
a) 28%
b) 18%
c) 12%
d) 5%
e) Nil
Answer: e) Nil
Q12. What is the GST on packaged food like biscuits and chocolates under GST 2.0?
a) 18%
b) 12%
c) 28%
d) 5%
e) Nil
Answer: d) 5%
Q13. Which new institution is set to resolve GST disputes by December 2025?
a) GST Council Secretariat
b) NITI Aayog Tribunal
c) GSTAT
d) Finance Commission
e) SEBI Tribunal
Answer: c) GSTAT
Q14. Which of these is NOT an objective of GST 2.0?
a) Simplification of slabs
b) Boost to MSMEs
c) Promotion of green energy
d) Increase of customs duties
e) Cheaper healthcare
Answer: d) Increase of customs duties
Q15. The estimated short-term revenue loss due to GST 2.0 is?
a) ₹22,000 crore
b) ₹35,000 crore
c) ₹48,000 crore
d) ₹60,000 crore
e) ₹1,00,000 crore
Answer: c) ₹48,000 crore
Q16. GST collection in FY 2024–25 was how much?
a) ₹18 lakh crore
b) ₹19 lakh crore
c) ₹20 lakh crore
d) ₹22.08 lakh crore
e) ₹25 lakh crore
Answer: d) ₹22.08 lakh crore
Q17. Which sector benefits from GST reduction on ACs and TVs?
a) Tourism
b) Healthcare
c) Consumer durables
d) Agriculture
e) Aviation
Answer: c) Consumer durables
Q18. GST is a ______ tax.
a) Source-based
b) Production-based
c) Destination-based
d) Service-based
e) Import-based
Answer: c) Destination-based
Q19. Under GST 2.0, fertilizers like sulphuric acid and ammonia are taxed at?
a) 28%
b) 18%
c) 12%
d) 5%
e) Nil
Answer: d) 5%
Q20. What is the expected GDP growth impact of GST 2.0?
a) Decline of 2%
b) No change
c) Increase of 0.5%
d) Increase of 1–1.2%
e) Increase of 3%
Answer: d) Increase of 1–1.2%
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