GST 2.0 Gets the Green Light: India’s indirect tax structure is set for one of its biggest overhauls since the launch of the Goods and Services Tax (GST) in 2017. At the 56th GST Council meeting held on September 3 in New Delhi, Union Finance Minister Nirmala Sitharaman announced sweeping reforms under the framework of GST 2.0, effective from September 22, 2025. The changes are expected to directly impact households, small businesses, and key industries across the country.
The biggest winners of the new GST reforms are daily-use consumer goods, essential food items, and renewable energy products, which will now be available at lower prices thanks to significant tax cuts. On the other hand, sin goods, luxury products, and environmentally sensitive items like coal will face higher taxes as the government seeks to balance revenue needs with social and environmental considerations.
The move comes at a critical juncture, with inflationary pressures still weighing on households and businesses. The government aims to boost consumption ahead of the festive season, while also realigning tax structures to promote sustainability and reduce dependency on polluting sectors. With multiple sectors set to see price shifts, here’s a breakdown of what gets cheaper and what turns costlier under GST 2.0.
What Gets Cheaper Under GST 2.0?
1. Food and Daily Essentials
- UHT milk: Reduced from 5% to tax-free
- Condensed milk, butter, ghee, paneer, and cheese: Moved from 12% to 5% or nil in some cases
- Staple foods: Malt, starches, pasta, cornflakes, biscuits, chocolates, and cocoa products now taxed at 5% instead of 12–18%
- Dry fruits and nuts: Almonds, pistachios, hazelnuts, cashews, and dates slashed from 12% to 5%
- Sugar and confectionery: Significant rate reductions to make everyday consumption more affordable
2. Consumer Goods
- Electronics: Entry-level and mass-use appliances reduced from 28% to 18%
- Footwear and textiles: GST cut from 12% to 5%
- Paper sector: Certain grades of paper moved from 12% to nil
- Personal care products: Hair oil, shampoo, dental floss, and toothpaste dropped from 18% to 5%
3. Automobile Sector
- Small cars: GST reduced from 28% to 18%
- Two-wheelers: Rates lowered to support mass-market affordability
- Electric vehicles and components: Continued lower rates to promote green mobility
4. Renewable Energy and Green Goods
- Solar panels, wind turbines, and storage devices: Reduced to 5% or nil in many cases
- LED lighting and energy-efficient appliances: Moved to lower tax brackets to encourage adoption
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What Gets Costlier Under GST 2.0?
1. Sin and Luxury Goods
- Tobacco products, cigarettes, alcohol (where GST applies), and pan masala: Higher tax slabs maintained or increased to discourage consumption
- Luxury cars and high-end SUVs: Remain in the highest tax bracket with added cess
2. Coal and Polluting Fuels
- Coal: Taxed at a higher rate to push industries toward renewable alternatives
- Certain fossil-fuel-based products: Increased GST to support India’s clean energy transition
3. Entertainment and Lottery Services
- Lottery and betting services: Revised rules, with higher tax incidence to curb speculative activities
- High-end entertainment services: Continued taxation in higher brackets
Impact on Consumers and Businesses
- Households: Lower costs for essential goods and daily-use items will directly benefit middle-class families, especially ahead of the festive season.
- SMEs and Retailers: Reduced GST on textiles, footwear, and paper will lower input costs, making products more competitive.
- Auto Sector: The reduction in GST for small cars and two-wheelers is expected to boost sales volumes, giving the automobile industry a festive-season push.
- Green Economy: Tax incentives for renewable energy devices will accelerate India’s transition to sustainable energy.
- Coal and Energy-Intensive Industries: Higher taxes may raise operational costs, nudging industries toward cleaner alternatives.
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Conclusion
The rollout of GST 2.0 from September 22 marks a landmark step in India’s tax policy, combining consumer relief with long-term structural goals. By reducing taxes on essentials and renewable energy, the government is signaling its intent to support households, stimulate consumption, and encourage sustainable growth.
For everyday consumers, the immediate benefit will be cheaper groceries, personal care products, and even affordable cars, giving purchasing power a much-needed boost. The timing ahead of the festive season is expected to significantly lift market sentiment and spending.
At the same time, by increasing taxes on coal, luxury products, and sin goods, GST 2.0 reinforces India’s broader priorities—climate action, fiscal prudence, and social responsibility. While industries dependent on coal may face higher costs, the move is likely to accelerate the nation’s clean energy transition.
Overall, GST 2.0 reflects a balanced reform approach, easing the burden on middle-class households while discouraging consumption of non-essential and harmful goods. The true test, however, will lie in its execution and whether the expected consumption boost translates into sustained economic growth.
FAQs on GST 2.0 Changes
1. What is GST 2.0 and when does it come into effect?
GST 2.0 is the latest reform of India’s Goods and Services Tax structure, announced during the 56th GST Council meeting. It comes into effect on September 22, 2025, with revised rates for multiple sectors including food, consumer goods, and energy.
2. Which items will become cheaper under GST 2.0?
Daily essentials like milk products, dry fruits, biscuits, chocolates, footwear, textiles, hair oil, shampoo, and toothpaste will become cheaper. Small cars, two-wheelers, and renewable energy devices also see reduced GST rates.
3. Which items will become costlier under GST 2.0?
Coal, sin goods like tobacco and pan masala, luxury cars, and certain lottery/entertainment services will face higher taxation. The aim is to curb harmful consumption and promote cleaner alternatives.
4. How will GST 2.0 affect the auto sector?
GST cuts on small cars and two-wheelers are expected to boost affordability and sales, while incentives for electric vehicles support India’s green mobility mission. Luxury cars, however, will remain in the highest tax brackets.
5. What does GST 2.0 mean for the average household?
For households, GST 2.0 means lower grocery bills, cheaper personal care products, and reduced costs for mass-market goods. This reform is expected to directly ease inflationary pressure on families, especially ahead of the festive season.