The Indian government has announced a sweeping overhaul of the Goods and Services Tax (GST) system, introducing "GST 2.0," which will take effect from 22 September 2025. Announced by Finance Minister Nirmala Sitharaman, the reform simplifies the tax structure into two main slabs of 5% and 18%, replacing the previous four-tiered system.
A key feature is a new 40% "sin tax" slab for luxury and de-merit goods. Items falling into this category include aerated and caffeinated beverages and also aerated sugary drinks, cold drinks, carbonated beverages with fruit juice. Online gaming, along with helicopters, yachts, and motorcycles with engine capacities over 350cc is to be taxed the same. Tobacco is to fall under this category as well and will be taxed at 40% as per reports.
The overhaul provides significant relief for consumers, with GST on numerous daily essentials like hair oil, soaps, shampoos, and bicycles dropping from 18% to 5%. Basic food items including milk, paneer, and Indian breads have been made fully exempt from GST. These changes aim to simplify the system and reduce costs for households.
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