New Delhi — Finance Minister Nirmala Sitharaman has said the newly introduced GST reform, labelled “GST 2.0,” marks the culmination of India’s tax reform process. She stressed that the overhaul was anchored in boosting affordability and advancing the government’s vision of a self-reliant India.
Calling the move a “people’s reform,” Sitharaman said the new structure was designed to impact households directly by rationalising tax rates on nearly 400 items. The changes are expected to reduce daily expenses, encourage consumer spending, and stimulate growth in key sectors.
The GST Council approved a fundamental restructuring of the system, replacing the earlier four-tier slabs with two main categories — 5% for essential goods and 18% for most others. This consolidation aims to simplify compliance and bring greater clarity for both businesses and consumers.
As a result, essential items such as toothpaste, soaps, and personal care products have shifted to the 5% slab from the earlier 18%. Similarly, small cars, household appliances, and several consumer durables have been moved to the 18% bracket from the earlier 28%. Insurance policies covering life and health have also been exempted, providing added relief to families.
The new rates will come into effect from September 22, just ahead of the festive season. The timing is expected to give households early relief and boost sales in the retail sector during Diwali.
While the government anticipates a short-term revenue dip estimated at ₹48,000 crore, it is confident that increased consumption will compensate for the loss over time. Economists, however, remain cautious about whether this optimism will hold in the face of fiscal pressures.
Despite scepticism, Sitharaman maintained that GST 2.0 balances revenue needs with the welfare of citizens and represents a step towards a more transparent and citizen-friendly tax regime.