The Modi government has announced major reforms to the Goods & Services Tax (GST), often being called GST 2.0. These changes are designed to reduce prices of essential goods and services, simplify the tax system, and provide direct relief to the common people. The new GST rates will be effective from 22nd September 2025, just before the Navratri festival season.
Previous GST Structure (Before Reforms)
Since its launch in July 2017, GST replaced multiple indirect taxes. Earlier, goods and services were divided into four slabs:
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5% – Essential goods and some basic services
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12% – Mid-range goods
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18% – Standard rate for most goods and services
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28% – Luxury and sin goods (like tobacco, luxury cars, etc.)
While GST brought uniformity, it also had complexities such as multiple slabs, higher costs on daily essentials, and inverted duty structures.
New GST System (After Reforms)
The latest reforms simplify the system and bring relief in multiple ways:
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Two Main Slabs
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5% for essential goods and services
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18% for most other goods and services
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Special 40% Slab
For luxury and sin goods such as high-end cars, tobacco, and other harmful products. -
GST Reductions on Everyday Items
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Hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, and tableware – reduced to 5%.
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Paneer, milk, chapati, paratha, Indian breads – moved to 0% GST (Nil rate).
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Packaged foods like namkeens, chocolates, sauces, pasta, and coffee – reduced to 5%.
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Agriculture & Rural Benefits
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Tractors, drip irrigation systems, farm machinery, bio-pesticides – reduced to 5%.
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Healthcare Benefits
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Medicines, diagnostic kits, medical equipment – reduced to 5% or nil.
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Health & life insurance premiums – made GST exempt.
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How Common People Will Benefit
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Cheaper groceries & essentials – Lower GST on soaps, shampoos, foods, and household goods.
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Lower health expenses – Reduced GST on medicines and healthcare services.
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Affordable farming costs – Cheaper farm machinery and inputs.
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More savings for families – Reduced monthly household expenditure.
Challenges Ahead
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Government will see short-term revenue loss due to lower GST collections.
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Businesses must update billing and accounting systems to match new slabs.
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Ensuring that companies pass on tax benefits to consumers will be key.
Conclusion
The GST rate cuts announced by the Modi government are a big relief for the common man. By simplifying slabs and lowering taxes on daily essentials, healthcare, and agriculture, these reforms are expected to reduce living costs, improve consumption, and boost the economy.
This move not only simplifies India’s tax structure but also shows the government’s focus on making growth people-centric.
