The second generation of Goods and Services Tax (GST 2.0) has been implemented in India starting today, September 22, 2025, coinciding with the first day of Navratri. This new tax structure aims to reduce the tax burden on essential and mass-market products, while increasing taxes on ultra-luxury and sin goods.

Under GST 2.0, the majority of goods and services will now fall under either the 5% or 18% tax slabs, or attract no tax. The previous 12% and 28% GST tax slabs have been eliminated. However, a special 40% GST rate has been introduced for ultra-luxury products and sin goods such as pan masala, cigarettes, and aerated water with added sugar and carbonated beverages.

Prime Minister Narendra Modi has hailed the new GST reforms as a "GST Bachat Utsav" (savings festival), expressing confidence that the changes will simplify the tax structure, make it fairer, and lower prices on essential goods. FM Nirmala Sitharaman described the GST reform as a revolution and stated that the Modi government's "Diwali gift" was a 10% tax cut on 375 products, which has helped bring down consumer prices.

Impact on Various Sectors:

• Automobiles: The auto sector is expected to be one of the biggest beneficiaries of the GST 2.0 implementation. Duties on small cars have been reduced to 18% from the previous 28% plus surcharge. Even luxury cars, which will be taxed at 40%, may see price reductions due to the elimination of cess. Several automakers, including Maruti Suzuki, Tata Motors, Mahindra, and Hyundai, have already announced significant reductions in vehicle prices.
• FMCG: Fast-moving consumer goods (FMCG) companies like Hindustan Unilever, Procter & Gamble, and Emami have announced price cuts on daily-use items like toilet soaps, hair oil, shampoo, toothpaste, toothbrush, razors, after-shave lotions, and baby diapers. The GST on these items has been reduced to 5% from the previous 12% or 18%.
• Appliances: Appliance manufacturers have also reduced prices on products like air conditioners and dishwashers. Leading companies such as Voltas, Daikin, Godrej Appliances, Panasonic, and Haier have released revised price lists effective today. Consumers can expect price reductions of up to ₹4,500 on air conditioners and up to ₹8,000 on dishwashers.
• Food: Many food items have been moved to the NIL or 0% tax bracket, including roti, parantha, paneer, and khakra. Gujarat Cooperative Milk Marketing Federation (GCMMF) has announced revised price lists for over 700 product packs, offering customers the full benefit of the GST reduction across product categories like butter, ghee, UHT milk, ice cream, cheese, paneer, chocolates and more.

Simplified Tax Structure:

The new GST regime simplifies the tax structure by consolidating the previous four-slab system (5%, 12%, 18%, and 28%) into two primary slabs: 5% and 18%. This streamlined structure is intended to ease compliance for businesses and provide greater clarity for consumers.

Items with Updated GST Rates:

• 5% GST Rate: Products such as soaps, shampoos, bicycles, and packaged foods will now attract a 5% GST rate, reduced from the earlier 12% or 18%.
• 18% GST Rate: Household appliances, including air-conditioners, televisions above 32 inches, and dishwashers, will see rates reduced from 28% to 18%. Clothes priced above Rs 2,500 will now attract a higher GST rate of 18% compared to 12% before.
• 40% GST Rate: This rate applies to sin and luxury goods, including pan masala, unmanufactured tobacco, cigars, cigarettes, and aerated waters containing added sugar.

The implementation of GST 2.0 is expected to have a significant impact on the Indian economy, potentially injecting ₹2 lakh crore and leaving consumers with more disposable income. The changes are anticipated to boost demand in key sectors during the festive season.