Prime Minister Narendra Modi has announced that Indian citizens are projected to save ₹2.5 lakh crore annually due to the implementation of GST 2.0 and recent income tax cuts. Addressing the nation on September 21, 2025, ahead of the rollout of GST 2.0, PM Modi described the reforms as a "Bachat Utsav" or a festival of savings. He stated that these changes would ease the financial burden on households and reinforce India's attractiveness for investments and entrepreneurship.
The Goods and Services Tax (GST) Council approved the next generation of GST reforms earlier in September, paving the way for a simplified tax structure with two primary slabs: 5% and 18%. This new structure will take effect on September 22, coinciding with the beginning of Navratri. The Prime Minister expressed satisfaction that the GST Council, which includes representatives from both the Union and State governments, had collectively approved the Union Government's proposals for GST rate reductions and reforms, which are expected to benefit the general public, farmers, MSMEs, the middle class, women, and young people.
Under the new GST regime, nearly 99% of goods previously taxed at 12% will now be taxed at 5%, and approximately 90% of items formerly in the 28% bracket will move to the 18% slab. A 40% compensation cess will still be applied to luxury and sin goods. The Prime Minister emphasized that essential goods would become more affordable, benefiting the middle class and youth.
PM Modi credited the collaboration between the central and state governments for creating "one nation, one tax". He recalled the complex web of taxes that existed before 2014, which increased costs and burdened household budgets. According to PM Modi, these reforms reflect the government's "Nagrik Devo Bhava" (citizen-first) approach to economic policies.
These reforms are expected to make doing business easier and attract more investment. Streamlined processes, including simplified registration and return filing, faster refunds, and reduced compliance costs, are intended to ease the burden on businesses, especially MSMEs and startups.
The Prime Minister also urged citizens to support "Atmanirbhar Bharat" (self-reliant India) by buying and using domestically produced goods. He encouraged states to strengthen their manufacturing sectors and promote the "Made in India" brand.
The implementation of GST 2.0 is expected to have a wide-ranging impact across various sectors. Essential items, electronics, and automobiles are expected to become more affordable. FMCG, auto, and retail companies have already announced price reductions. Groceries, household items, and consumer durables are all expected to see price decreases. Daily essentials are becoming cheaper as companies proactively reduce prices, dispatching products with revised price tags.
However, the rollout of GST 2.0 may present some challenges. Small and medium-sized businesses may need to upgrade their ERP and billing systems, and retailers with large inventories may face logistical difficulties in updating price lists. There may also be some confusion among shopkeepers in remote areas regarding the new rates, and coordination issues between central and state GST systems could create temporary confusion for multi-state operations.
Despite these potential challenges, the new GST system is expected to boost consumer spending and stimulate economic growth. By reducing tax rates on essential goods and simplifying the tax structure, the government hopes to increase disposable income and encourage consumption.
