Effective September 22, 2025, consumers can expect significant benefits from the implementation of GST 2.0, which includes changes to product manufacturing and MRP (Maximum Retail Price) labeling. This revamp, approved by the GST Council on September 3, 2025, aims to simplify the tax structure, correct inefficiencies, and stimulate economic activity.
The core of GST 2.0 is a move to a simplified two-slab structure of 5% and 18%, a significant departure from the previous four-slab system. Essential goods and services will fall under the 5% merit rate, while most other items will be taxed at the 18% standard rate. A 40% demerit rate will be applied exclusively to luxury and sin goods like tobacco and high-end cars. This streamlined approach is expected to reduce classification complexities, duty inversions, and litigation risks, making the tax system more transparent and easier to navigate for businesses.
Many daily-use goods are set to become more affordable. Items that were previously taxed at 12% or 28% will now fall under the lower slabs.
GST 2.0 is expected to provide several benefits for businesses, especially MSMEs. The simplified tax structure, with fewer slabs, should lead to easier filing and fewer disputes. Streamlined registration processes and faster refund mechanisms for exporters are also expected.
Alongside the GST changes, the government is also focusing on enhancing transparency in retail pricing through potential changes to the MRP system. The Union Ministry of Consumer Affairs has proposed amendments to the Legal Metrology (Packaged Commodities) Rules, 2011, to mandate the declaration of key information on pre-packaged commodities weighing over 25 kg or measuring more than 25 liters when sold in retail markets. This move seeks to close a loophole that exempts bulk packages from displaying crucial details like MRP, best before date, manufacturer information, and country of origin. The proposed changes aim to ensure that consumers have complete information when making purchases.
The GST reforms are projected to boost India's GDP by 0.2-0.3% in the 2025-26 financial year. Experts also estimate a potential drop in inflation rates. The increased spending power resulting from lower costs on essentials is expected to drive demand and credit expansion, further stimulating economic growth.
The new GST rates will take effect from September 22, 2025, coinciding with the first day of Navratri, with the exception of changes to tobacco products, which will be implemented later. The government has allowed a transition period of at least 180 days for businesses to adapt to labeling provision changes.
