Prime Minister Narendra Modi rolled out the new GST rates under the government’s GST 2.0 initiative on September 22, 2025. The simplified tax system aims to make essential goods more affordable and boost local manufacturing. The reform coincides with Navratri, marking the start of a nationwide “GST Savings Festival.”
Simplified Tax Structure Under GST 2.0
The new GST regime, approved at the 56th GST Council meeting, reduces the previous four-slab system—5%, 12%, 18%, and 28%—to just two primary rates: 5% and 18%. Essentials like ghee, paneer, butter, dry fruits, jam, ketchup, snacks, coffee, and ice cream now fall under the lower 5% slab, reducing costs for households.
Luxury items and sin goods, including high-end vehicles and tobacco, are subject to a new 40% demerit rate. The compensation cess for such products has been merged into the new system.
Impact of new GST rates on Consumer Durables
Along with groceries, certain consumer durables will also attract lower taxes. Items such as televisions, washing machines, and air conditioners now come under reduced rates, potentially lowering retail prices for consumers. This move aims to increase household savings and encourage consumption-led growth.
PM Modi’s Message on GST Savings Festival
In a message shared on social media, PM Modi described the rollout as a “GST Savings Festival” and emphasized its role in promoting Aatmanirbhar Bharat (Self-Reliant India). He stated that the reform would benefit poor and middle-class families, youth, farmers, women, small traders, and shopkeepers the most.
“This Navratri is special. With GST 2.0, the mantra of Swadeshi will be further energized,” PM Modi said, highlighting the focus on indigenous manufacturing.
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Government Perspective on Economic Growth
Finance Minister Nirmala Sitharaman noted that the revised GST structure could add up to Rs 2 lakh crore to the economy. The reform aims to reduce compliance burdens for businesses while enhancing revenue collection through better compliance and a broader tax base.
According to officials, GST 2.0 is expected to simplify filing processes for businesses, making it easier for small and medium enterprises to comply without extensive paperwork.
Opposition Reaction
While the government hails the reform as transformative, several Opposition leaders criticized it as cosmetic. They argued that taxing essential goods under the original GST framework caused economic hardship, and the new measures serve only as a partial remedy. Some leaders have called for an apology for earlier policies that raised costs for ordinary citizens.
Benefits for Households and Businesses
The simplified rates under GST 2.0 are expected to directly benefit households by lowering prices of daily essentials and certain consumer durables. Small traders and shopkeepers will also see reduced compliance costs, freeing resources to expand their businesses.
The dual-rate system—5% for essentials and 18% for other goods—makes the tax system easier to understand for both consumers and businesses. Combined with existing income tax exemptions, the government calls this a “double bonanza” for taxpayers.
Boost to Swadeshi and Local Manufacturing
PM Modi urged states to support local manufacturing and promote domestic value addition. The reforms are part of a larger government effort to strengthen Aatmanirbhar Bharat, reduce dependency on imports, and ensure sustainable economic growth.
Experts say that by incentivizing production and consumption of Indian-made goods, GST 2.0 could stimulate long-term investment and generate employment opportunities.
GST 2.0 as a Milestone in Tax Reform
The implementation of new GST rates marks a significant milestone in India’s taxation system. By streamlining slabs, lowering taxes on essentials, and introducing targeted rates for luxury items, the government aims to balance consumer affordability with revenue efficiency.
Households are expected to experience immediate benefits in the form of lower prices on everyday goods, while businesses may see improved operational efficiency due to simplified compliance requirements.
The new GST rates under GST 2.0 represent a major step in making the tax system simpler, fairer, and more conducive to economic growth, as highlighted by PM Modi and Finance Minister Sitharaman. Consumers and businesses alike are set to benefit from the reduced burden, aligning with the government’s vision of a self-reliant and prosperous India.
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