In an exclusive interview, Finance Minister Nirmala Sitharaman shared details of GST 2.0, India’s most comprehensive tax overhaul since 2017. The reforms aim to reduce compliance burden, simplify the structure, and deliver tangible benefits to households and businesses.
1. A Sweeping Overhaul Ahead of the Festive Season
From September 22, 2025, the GST framework will shift to a simplified two-slab system—5% and 18%, while luxury and sin goods will continue to be taxed at 40%. Everyday essentials like soaps, toothpaste, medicines, farm machinery, and Indian breads will either attract 5% GST or be completely exempted. Earlier slabs such as 12% and 28% have been eliminated for clarity and ease of compliance.
2. Purpose and Timing
According to the finance minister, the reforms are the result of over 18 months of preparation and align with Prime Minister Narendra Modi’s vision of easing taxes for all citizens. The move is designed to particularly benefit farmers, small businesses, and the middle class, while also stimulating consumer demand ahead of the festive season.
3. Ensuring Consumers Benefit
A common concern has been whether companies would pass on tax savings to consumers. Sitharaman assured that industry representatives have committed to lowering prices accordingly. The government, she added, will closely monitor the implementation, with regulators and elected representatives playing a role in ensuring compliance at the retail level.
4. Aimed at Clarity and Fairness
GST 1.0 created a unified national tax system, but its multiple slabs often created confusion. GST 2.0 addresses this by rationalizing rates and removing anomalies. For instance, the same 5% rate will now apply uniformly to different types of popcorn. However, products like petrol and diesel remain outside the GST framework due to ongoing policy considerations.
5. Countering Political Criticism
The finance minister also hit back at opposition parties for criticizing the reforms. She highlighted that the earlier GST rate structure was largely inherited from pre-GST taxation systems, and the government is now taking bold steps to simplify it. She also pointed out the irony of critics who once dismissed GST as a “Gabbar Singh Tax” now attempting to claim credit for its evolution.
6. GST 3.0: What Lies Ahead
Looking ahead, Sitharaman hinted that GST 3.0 could be the next step in India’s tax evolution. While details remain under discussion, the focus will be on further simplifying procedures, strengthening fairness, and ensuring that small traders and businesses face minimal compliance hurdles.
