India’s Goods and Services Tax (GST) is entering a new phase with the launch of GST 2.0, aimed at simplifying the tax structure, addressing inefficiencies, and boosting economic activity.
The reform, approved on September 3, will come into effect on September 22, marking the most significant overhaul since GST was introduced in 2017.
GST 2.0 replaces the previous four-slab system with a simpler structure consisting of a five percent Merit Rate for essential products and services and an 18 percent Standard Rate for most other items.
Luxury and vice goods, such as high-end vehicles, pan masala, gutkha, and cigarettes, are subject to a 40 percent de-merit rate.
The changes reduce GST on consumer durables, small cars, and two-wheelers, as well as everyday essentials like toothpaste, soaps, medications, and certain foods. Life-saving medicines, agricultural machinery, and irrigation equipment also benefit from lower rates.
The reform introduces administrative simplifications, including streamlined returns for exporters and faster registration for low-risk companies.
The revised structure is expected to ease compliance, reduce categorisation disputes, and expedite refunds. Lower taxes on consumer items may create downward pressure on inflation, while reduced rates for small vehicles and household goods could expand demand.
The 40% de-merit rate may moderate consumption of luxury and premium products.
Overall, GST 2.0 is designed to simplify the system, improve predictability, and make tax compliance easier for businesses and consumers, while potentially boosting growth across multiple sectors.
Source from: https://www.cnbctv18.com/business/finance/gst-2-0-explained-key-changes-impact-on-taxpayers-overhaul-19672400.htm
