India is on the verge of an indirect tax overhaul in its indirect tax regime with the much-anticipated GST 2.0 reforms, scheduled for implementation by Diwali 2025. These reforms aim to simplify the Goods and Services Tax (GST) structure, ease compliance, and provide relief to consumers, farmers, MSMEs, and the middle class. These proposals were proposed by the GST Council, led by Union Finance Minister Nirmala Sitharaman, at its 56th meeting being held today and tomorrow in New Delhi.
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Background
Ever since its rollout in 2017, GST has been getting obsolete with issues concerning the frictions from multiple slabs, inverted duty structures, and complicated compliances. The government revealed the future of GST reforms in the Prime Minister’s address during Independence Day on 15th August 2025, focusing on three pillars: ease of living, rate rationalisation, and structural reforms. The reforms aim at lowering GST slabs and rationalising rates for boosting economic growth and lowering the tax burden on aspirational, comfort-based and essential goods.
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Current GST Council Meeting
The 56th GST Council meeting is crucial to finalise new tax slabs and rates. It consists of finance ministers of states and union territories, concurring or taking weighted voting decisions. The main agenda points are simplifying GST slabs, revenue compensation for states, and easier compliance with digital means like pre-filled returns and quicker refunds. The council’s recommendations may result in GST 2.0 implementation by Diwali 2025, with tax rates becoming more predictable and stable.
Proposed GST Slabs and Rates
GST 2.0 also suggests bringing down the slabs from four to two broad rates – 5% and 18%, with a special 40% slab for sin and luxury items like tobacco and luxury cars. This simplification is likely to shift most goods taxed at 12% to 5%, and 28% slab items to 18%, slashing the tax complexity by leaps and bounds.
Category |
Current GST Rates |
Proposed GST Rates |
| Food and Textiles | 12% | 5% |
| Electronics (TV, AC, etc) | 28% | 18% |
| Small Cars | 28% (+Cess) = app. 29% | 18% |
| Luxury Cars and other vehicles | app. 50% | 40% |
| Medicines | 12% | 0%-5% |
| Insurance (Life/Health) | 18% | 0%-5% |
| FMCG | 12% | 5% |
| Cement | 28% | 18% |
| Salon Services | 18% | 5% |
| Cinema Tickets- Economy | 12% | 5% |
| Cinema Tickets- Premium | 12% | 18% |
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Impact and Outlook
GST 2.0 seeks to deliver a simple and equitable tax regime by removing inverted duty structures, minimizing dispute cases, and granting relief to taxpayers through simplified compliance procedures. It should spur consumption by cutting taxes on essentials and aspirational products while charging more taxes on luxury and sin products. The reduction of the compensation cess by March 2026 will also stabilise the GST regime.
Overall, GST 2.0’s simplified tax slabs and rationalised rates will empower MSMEs, enhance ease of doing business, and enhance transparency, positioning it as a historic reform for the Indian economy as it steps into a new age of indirect taxation. The impending launch by Diwali 2025 is being awaited with anticipation by consumers, businesses, and policymakers. Some speculations also state that the implementation of the revised rates could be well earlier, in fact around Navratri.
