GST 2.0 Simplified Tax Structure and Its Impact on Indian Economy

GST 2.0 Simplified Tax Structure and Its Impact on Indian Economy

Last Updated Sep - 22 - 2025, 02:24 PM | Source : Fela News

GST 2.0 introduces a two-slab system, reducing tax rates and simplifying compliance.

India's Goods and Services Tax (GST) system has undergone a significant overhaul with introduction of GST 2.0, effective from September 22, 2025. This reform aims to simplify the tax structure, enhance compliance and to stimulate economic growth.

The new system consolidate the previous four-tier GST structure into two primary slabs: 5% for essential goods and services, and 18% for most other items. This simplification is expected to reduce classification disputes and ease the compliance burden on business.

Notably, life insurance premiums has been exempted from GST, making financial protection more affordable for individuals. Additionally, healthcare costs has been reduced, with life-saving drugs and critical medical items now attract lower GST rates or being tax-free.

Consumer goods also seen price reductions. Household essentials like soaps, shampoos and packaged foods now fall under the 5% GST slab, leading to lower prices for consumer.

The reform also addresses the construction sector by reducing GST on cement to 18%, aiming to boost the housing and infrastructure industries.

While the new system bring relief to many sectors, luxury goods, tobacco and alcohol remains taxed at higher rates or outside the GST framework.

Overall, GST 2.0 is designed to create more transparent and efficient tax system, benefiting consumers, businesses and economy at large.

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