04/09/2025
GST Reform 2.0: A Game Changer for India’s Tax Landscape
We are pleased to see the GST Council implement GST Reform 2.0, effective from September 22, 2025—coinciding with the auspicious beginning of Navratri.
🔹 Key Highlights of the Reform:
• Nil GST: UHT milk, paneer, roti, pizza bread, notebooks, exercise books, pencils.
• 5% GST: Butter, ghee, cheese, chocolates, biscuits, dry fruits, tractors, tyres, agri-equipment, renewable energy devices.
• Healthcare benefit: A wide range of medicines and diagnostic kits moved down to 5% or Nil GST, reducing cost of treatment and care.
• Simplification of GST structure from four slabs to two primary rates—5% and 18%—with a 40% slab reserved for sin and super-luxury goods.
• Relief for households: Essentials such as toiletries, packaged foods, agri-implements and medical items now attract only 5% GST.
• Boost to consumption: Goods such as TVs, ACs, small cars and two-wheelers (below 350 cc) move from the 28% bracket down to 18%.
• Insurance & healthcare relief: Individual life and health insurance policies (including family floaters and senior citizen plans) are now GST-exempt, along with several life-saving drugs.
🔹 Higher GST / Cess:
• 40% GST/cess: Pan masala, gutkha, to***co, aerated & caffeinated beverages, luxury cars, high-end motorcycles, yachts, aircraft, pistols.
• 18% GST: Coal, lignite, peat and cement (from higher slabs earlier).
🔹 Compliance & Trade Facilitation:
• Standalone restaurants cannot treat themselves as “specified premises” to opt for 18% with ITC.
• 90% provisional refunds in cases of inverted duty structure to be rolled out based on risk evaluation.
• GST Appellate Tribunal (GSTAT): To be operational later this month; hearings will begin from Dec 2025. Backlog appeals can be filed until 30th June 2026.
🔹 Economic Outlook:
This reform is expected to:
• Boost consumption and reduce household burden
• Simplify compliance for businesses
• Potentially add 100–120 basis points to GDP over the next 4–6 quarters
🔹 Points of Caution:
While the reform strengthens the “ease of doing business” narrative, fiscal implications remain a concern, with states projected to face a revenue impact of nearly ₹48,000 crore.
As a Chartered Accountant, we believe GST Reform 2.0 strikes the right balance between equity, efficiency and growth, while aligning India’s tax system with its long-term economic vision in uncertain global conditions.
