GST 2.0: Big Changes Coming to India’s Tax System in 2025

Iyrine Francis
Manager, Audit Department

30-Aug-2025

India is getting ready to launch a new version of the Goods and Services Tax (GST), known as GST 2.0,
by Diwali 2025. This was announced by Prime Minister Narendra Modi in his Independence Day
speech on August 15, 2025.

These reforms aim to make the GST system simpler, reduce the tax burden on people and businesses,
and boost the economy.

What Is Changing in GST?

The government has proposed three major areas of reform:

1. Simpler Structure
 The number of GST tax slabs will be reduced.
 Only two main GST rates will remain: 5% for essential items and 18% for most goods and
services.
 The current 12% and 28% slabs will be removed.
 A new 40% GST slab will apply to luxury and sin goods like tobacco, pan masala, and online
gaming.

2. Lower Taxes on Essentials
 Items of daily use like toothpaste, umbrellas, sewing machines, bicycles, and pressure
cookers may move to the 5% slab, making them cheaper.
 Health and life insurance may also be taxed at a lower rate.
 White goods like TVs, fridges, ACs, and washing machines may shift from the 28% to the 18%
slab.
 Small petrol and diesel cars (under 4 meters) may also see a GST cut from 28% to 18%.

3. Easier Compliance for Businesses
 GST registration will be faster and fully online, especially for MSMEs and startups.
 Pre-filled GST returns will reduce errors and save time.
 Faster GST refunds will help exporters and small businesses.
 These steps will make it easier to start and run businesses in India.

Who Will Benefit?
 Consumers: Lower GST means lower prices on many goods.
 MSMEs and startups: Simpler rules and lower tax rates will reduce costs.
 Exporters and manufacturers: Fixing the inverted tax structure will free up working capital.
 The overall economy: Increased demand and business-friendly policies will help economic
growth.

Important Dates
 August 15, 2025: GST 2.0 announced by the Prime Minister.
 October 2025: GST Council will meet to finalise and approve the changes.
 Diwali 2025: GST 2.0 is expected to be rolled out across the country.
 March 2026: Compensation cess will be removed.

Conclusion
The upcoming GST reforms in 2025 will bring big changes to India’s tax system. With simpler tax
rates, cheaper goods, and easier compliance, GST 2.0 aims to help both businesses and common
people. If implemented on time, these reforms will make GST more transparent, fair, and growthfriendly
for the future of India.

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