India’s Goods and Services Tax (GST) is undergoing its most substantial overhaul since its inception in 2017. Starting September 22, 2025, the nation will transition to a more straightforward two-tier tax system. Most goods and services will now be categorized under 5% and 18% tax slabs, with a distinct 40% rate reserved for ultra-luxury items.
This major decision, announced during the 56th GST Council meeting led by Union Finance Minister Nirmala Sitharaman, seeks to enhance transparency and simplify tax compliance across the country.
The previous four-tier GST structure, which included rates of 5%, 12%, 18%, and 28%, frequently caused confusion and debates over product and service classification. With the introduction of ‘GST 2.0,’ most goods and services will now be consolidated into just two primary tax brackets:
- 5% Rate: Applied to essential items and daily necessities like food grains and medicines.
- 18% Rate: Covers most standard goods and services, encompassing sectors such as manufacturing, transport, and various services.
Additionally, the government has established a specialized 40% ‘de-merit’ rate for certain sin and luxury goods. This higher slab will apply to products like tobacco, pan masala, aerated beverages, and high-end vehicles.
The Union Finance Ministry formally announced the revised Central GST (CGST) rates for goods on September 18, 2025. Individual states are now expected to follow suit with their notifications for State GST (SGST) rates, with the new system officially commencing on Monday, September 22, 2025.
The fundamental goal of ‘GST 2.0’ is to significantly streamline India’s indirect tax system. By reducing the number of tax slabs, the aim is to eliminate classification ambiguities and disputes. For consumers, this new framework promises enhanced clarity, greater fairness, and a degree of protection against inflationary pressures.
Key Highlights of GST 2.0:
An embedded graphic illustrating the key changes and impacts of GST 2.0 was originally presented here, detailing the essential reforms at a glance.
The Union Government anticipates that these GST reforms will stimulate consumer spending. By making a wide range of goods and services more affordable, the new system aims to leave citizens with increased disposable income.
Interactive Dashboard: Explore New GST Rates
An interactive dashboard, which allowed users to search and filter a comprehensive list of goods and services along with their previous, current, and changed tax rates, was originally embedded here. This tool provided an easy way to understand the impact of the new GST regime on various categories like Agriculture, Automobile, Food, Healthcare, and more.