India is set to implement a revamped Goods and Services Tax (GST) structure, known as GST 2.0, aiming to simplify the tax system and provide relief to the common man. The GST Council has approved a shift to a primarily two-slab structure of 5% and 18%, with a special higher rate of 40% for specific goods. These changes are expected to take effect from September 22, 2025.

Key Features of GST 2.0:

• Simplified Tax Structure: The existing four-slab GST structure (5%, 12%, 18%, and 28%) will be streamlined into two primary rates: 5% and 18%. This simplification aims to reduce complexity and improve compliance.
• Focus on the Common Man: The overhaul prioritizes reducing the tax burden on essential goods and items commonly used by the middle class.
• Special Rate for Demerit Goods: A higher tax rate of 40% will be applied to "sin goods" and luxury items.

Changes in GST Rates:

• 0% GST: Several essential food items such as milk, paneer, and Indian breads (roti, chapati, paratha) will be fully exempt from GST.
• 5% GST: Many daily-use items will be taxed at a reduced rate of 5%. These include packaged foods like namkeen, bhujiya, sauces, pasta, cornflakes, butter, and ghee, as well as hair oil, toilet soaps, shampoos, toothbrushes, and bicycles. Spectacles and vision correction goggles will also be taxed at 5%, down from 28%.
• 18% GST: Consumer durables such as air conditioners, televisions (over 32 inches), dishwashing machines, monitors, and projectors will see their GST rate reduced from 28% to 18%. Small cars, motorcycles under 350cc, and vehicles for transporting goods will also be taxed at 18%. Cement will also see a reduction from 28% to 18%.
• 40% GST: A higher tax slab of 40% will be levied on certain goods, including:
  • Tobacco products: Cigarettes, cigars, chewing tobacco, gutkha, pan masala, and other related items.
  • Aerated waters, carbonated beverages, caffeinated drinks, and other non-alcoholic beverages.
  • Luxury vehicles: High-end cars and SUVs.
  • Motorcycles with engine capacity above 350cc, helicopters, and yachts.
  • Imported or dutiable personal-use articles and other miscellaneous goods.

Impact and Objectives:

• Discouraging Harmful Consumption: The increased tax on sin goods aims to discourage the consumption of products that are harmful to health or society.
• Revenue Generation: The higher tax rate on certain goods is expected to boost government revenue.
• Countering US Tariffs: The GST 2.0 reform is also seen as a strategic move to counter new tariffs imposed by the United States on Indian goods.
• Boosting Consumption: By reducing the tax burden on essential items, the government hopes to stimulate domestic demand and boost the Indian economy.

The implementation of GST 2.0 is expected to bring about significant changes in the Indian economy, impacting both consumers and businesses. While the simplified tax structure and reduced rates on essential goods are expected to provide relief to the common man, the higher tax rate on demerit goods aims to discourage harmful consumption and generate additional revenue for the government.