GST 2.0 is here! What the new tax reforms mean for you – 10 things to know

GST new tax reforms: Prime Minister Narendra Modi-led NDA government’s next-generation GST reforms come into effect on Monday, September 22, 2025, marking the launch of GST 2.0. The GST 2.0 overhaul aims to simplify taxation and reduce the financial burden on households, businesses, and farmers, bringing relief just in time for the festive season. This landmark reform is said to lowers costs for essentials, supports manufacturing, and makes healthcare and insurance more accessible, creating a more transparent, efficient system that benefits everyone and drives economic growth.1. Two-slab GST simplificationThe GST structure has been reduced to just two rates: 5% and 18%, replacing the earlier four slabs (5%, 12%, 18%, 28%). Essentials, household items, and daily goods mostly fall under the lower 5% slab or nil GST, while luxury and sin items are taxed at 40%.2. Life insurance premiums now GST-freeAll individual life insurance policies, including term plans, endowments, and ULIPs, are now exempt from GST. Even reinsurance on these policies falls under the exemption, making financial protection more affordable.3. Daily essentials cheaperHousehold essentials like soaps, shampoos, toothpaste, tableware, and bicycles are now taxed at 5%, while packaged foods such as namkeens, bhujia, sauces, pasta, chocolates, coffee, and preserved meat have GST reduced from 12–18% to 5%.Indian breads now attract 5% or nil GST, while FMCG firms such as Dabur, HUL, Nestle, ITC, and Amul have already slashed prices on a range of products, including juices, chocolates, baby diapers, and biscuits. 4. Medicines and healthcare more affordable Life-saving drugs and critical medical items see a GST cut from 12% to 0% or 5%, improving access to healthcare. Medical devices, spectacles, and diagnostic kits also benefit from lower rates, supporting both consumers and domestic manufacturing.5. Consumer durables made cheaperConsumer durables including TVs over 32 inches, air conditioners, and dishwashers now face 18% GST instead of 28%, making electronics more affordable while supporting domestic manufacturing.6. Housing and construction gains The GST on cement, marble, granite, and other building materials has been reduced from 28%/12% to 18% or 5%, lowering construction costs and helping home buyers and real estate projects.7. Auto sector relief Two-wheelers, small cars, and auto parts now fall under 18% GST, down from 28%, reducing costs for consumers and boosting India’s automotive manufacturing and exports.8. Support for farmers and agriculture GST on farm machinery, irrigation equipment, and bio-pesticides has been slashed to 5%, cutting farming costs and encouraging sustainable practices. Fertilizer inputs also benefit, boosting domestic production and reducing import dependence.9. Services sector gets a boost Services like hotel stays (up to Rs 7,500/day), gyms, salons, and yoga classes now attract 5% GST, making wellness and hospitality more affordable while promoting domestic tourism and employment.10. Impact on pricesLeading FMCG companies have already revised MRPs. For example, Dabur cut the price of Real Juice 1L from Rs 130 to Rs 122, Chyawanprakash 900 gm from Rs 475 to Rs 440, and toothpastes like Dabur Red from Rs 153 to Rs 135. Nestle reduced Maggi 600 gm from Rs 120 to Rs 116 and Nescafé Gold from Rs 855 to Rs 755. Amul lowered butter and ghee prices, while Procter & Gamble adjusted MRPs on Vicks, Head & Shoulders, and Pampers.The new GST is designed to increase affordability, boost consumption, and expand the tax base. Lower costs for goods and services can stimulate demand, improve revenues through compliance, and strengthen manufacturing. Exemptions on insurance and healthcare also enhance household security, supporting financial and social well-being.Also read: Full list of items with updated GST rates; what is cheaper & dearer after GST rate changes?