The government has shared a new plan to change the Goods and Services Tax (GST) system, also being called GST 2.0. This proposal, sent to the GST Council on August 15, 2025, aims to make the tax system simpler and easier to understand.
In the new system, most items will fall into just two tax rates, 5% and 18%. A special 40% tax rate will apply only to luxury and sin goods such as tobacco, gutka, and pan masala.
What May Get Cheaper
Everyday goods like TVs, fridges, washing machines, air conditioners, and cement, which currently have 28% GST, may be taxed at only 18%. Small FMCG products like sachets priced at ₹10 or below could also be taxed at 5%, making them more affordable. Even health and life insurance may come under a lower rate, giving some relief to households.
What Will Stay Costly
Luxury and sin goods will stay expensive under the 40% slab. Online gaming, marked as a demerit good, will also face the highest tax rate. Despite changes, the overall tax burden on gaming will remain about 88%.
Unclear Areas
Some sectors are still not clear in the proposal. Automobiles, which are now taxed at 28%, do not yet have a new rate decided. Petroleum products like petrol, diesel, natural gas, and crude oil are also expected to remain outside the GST system.
Who Will Benefit?
Several industries may gain from the changes. Sectors like textiles, fertilisers, renewable energy, handicrafts, agriculture, health, and insurance could see lower tax rates, which will help both companies and consumers.
The Big Impact
If approved, nearly 90% of items currently taxed at 28% could move to the 18% slab. This means cheaper goods for the public, while luxury and harmful products remain under high taxes.