As an Indian journalist covering economic policies and taxation, the buzz around “GST 2.0” has been intensifying in recent months. Introduced in 2017, the Goods and Services Tax (GST) revolutionized India’s indirect tax system by unifying multiple levies into a single framework. However, with the economy evolving rapidly—fueled by digitalization, MSME growth, and global trade pressures—the government has been pushing for “GST 2.0,” a next-generation overhaul aimed at simplifying compliance, rationalizing rates, and boosting consumption. On August 15, 2025, during his Independence Day address, Prime Minister Narendra Modi announced that GST 2.0 reforms would be rolled out by Diwali 2025, focusing on structural changes, rate simplification, and ease of doing business. This comes amid the 56th GST Council meeting preparations, where a panel of state finance ministers is reviewing proposals to merge slabs and address inverted duty structures.
While the exact details are yet to be finalized and notified, the proposed changes signal a major shift. Currently, as of September 3, 2025, GST operates under a multi-tier slab system: 0%, 5%, 12%, 18%, and 28%, with special rates like 3% for gold and 0.25% for precious stones. Recent council meetings, including the 55th on December 21, 2024, have made incremental revisions, such as reducing GST on molasses from 28% to 5% and on cancer drugs from 12% to 5%. But GST 2.0 aims for bolder moves: potentially collapsing the structure into two main slabs—5% and 18%—by eliminating the 12% and 28% rates for most items, while introducing a 40% rate for sin goods like tobacco. This could make nearly 99% of items in the 12% slab shift to 5% and 90% of those in 28% to 18%, slashing prices on essentials, electronics, and white goods to stimulate demand and support Atmanirbhar Bharat.
In this article, I’ll break down the current GST rates (pre-GST 2.0), highlight recent revisions, and outline the proposed changes under GST 2.0. This is crucial for businesses, consumers, and investors navigating the transition. Remember, these reforms are under review by the Group of Ministers (GoM) on Rate Rationalisation and the Fitment Committee, with final decisions expected at the upcoming GST Council meeting in September-October 2025. Until notified, the existing rates remain in force.
Current GST Slab Rates in India (As of September 2025)
India’s GST system categorizes goods and services into slabs based on their essentiality, with lower rates for necessities and higher for luxuries or demerit goods. The structure promotes equity while generating revenue—GST collections hit a record ₹2.1 lakh crore in April 2025. Here’s a comprehensive overview of the slabs, including examples of goods and services. These are determined using HSN (Harmonized System of Nomenclature) codes for goods and SAC (Service Accounting Code) for services.
1. 0% GST (Nil-Rated or Exempt Supplies)
This slab applies to essential items and services vital for public welfare, ensuring they remain affordable. No tax is levied, but input tax credit is generally not available for these.
| Category | Examples of Goods | Examples of Services |
|---|---|---|
| Food Essentials | Fresh fruits, vegetables, milk, eggs, unbranded cereals (rice, wheat, flour), meat, fish, natural honey (unbranded) | Public healthcare, educational services (school/college fees), agricultural services |
| Others | Books, newspapers (printed), life-saving drugs (certain), contraceptives | Anganwadi services, mid-day meals, public transport (metro, non-AC buses) |
- Impact: Covers about 7-8% of taxable supplies. Recent exemption: Extra Neutral Alcohol (ENA) for liquor production (53rd Council, 2024).
- Note: Exports and supplies to SEZs are zero-rated, allowing refunds on inputs.
2. 5% GST Slab
For basic necessities and semi-essentials, this low rate keeps prices accessible for the masses. It applies to around 15-20% of goods.
| Category | Examples of Goods | Examples of Services |
|---|---|---|
| Food Items | Packaged food (unbranded), tea, coffee, spices, edible oils, sugar, salt, footwear (<₹500/pair), apparel (<₹1,000) | Restaurants (non-AC), economy hotel rooms (<₹1,000/night), public transport (AC buses), job work for agriculture |
| Others | LPG cylinders, life-saving drugs, railway tickets, small tractors, millet-based products (loose) | Transport of agricultural produce, printing services for education |
- Recent Changes (55th Council, Dec 2024): Cancer drugs reduced from 12% to 5%; namkeens/savory items from 18% to 12% (but many now qualify for 5% if essential); molasses from 28% to 5%.
- Composition Scheme: Small businesses (turnover <₹1.5 crore) pay 1.5% (goods) or 5% (services) on turnover.
3. 12% GST Slab
This applies to standard, processed goods and services, forming about 15% of the tax base. It’s targeted for potential merger in GST 2.0.
| Category | Examples of Goods | Examples of Services |
|---|---|---|
| Food Items | Butter, ghee, cheese, dry fruits, fruit juices, processed foods (branded), umbrellas, sewing machines | Business class air travel, non-AC restaurants in hotels, construction of affordable housing |
| Others | Mobile phones, laptops (some), bricks, cement (certain), exercise books, medicines (non-life-saving) | Telecom services (basic), IT services (non-export), guest rooms (₹1,000-₹2,500/night) |
- Recent Revisions: Fortified rice kernels reduced; health/life insurance under review for lowering.
- TDS/TCS: TDS at 2% (up from 1% since July 2024); TCS at 0.5% for e-commerce (down from 1%).
4. 18% GST Slab
The most common slab, covering about 50% of goods and services—household items, electronics, and professional services. This is set to become a primary rate in GST 2.0.
| Category | Examples of Goods | Examples of Services |
|---|---|---|
| Consumer Goods | Hair oil, toothpaste, soap, cosmetics, electronics (TVs <32″, printers), packaged software, ice cream | Banking/financial services, telecom (post-basic), IT/consulting, AC restaurants, hotel rooms (>₹2,500/night) |
| Others | Passenger vehicles (<15 seats), mid-range appliances (ACs, fridges), railway goods | Event management, advertising, legal services |
- Key Update: Default rate for unspecified services. Recent: ENA for industrial use at 18% via new HS code.
5. 28% GST Slab
Highest rate for luxury, sin, and environmentally harmful goods, about 10-15% of supplies. Plus, compensation cess (1-204%) on items like tobacco (up to 204%), aerated drinks (12%), luxury cars (15-22%).
| Category | Examples of Goods | Examples of Services |
|---|---|---|
| Luxury/Sin Goods | Small cars, high-end motorcycles, consumer durables (ACs >2-tonne, TVs >32″), cigarettes, tobacco, aerated water | 5-star hotel services, betting/gambling, circus/cinema (certain) |
| Others | Cement (most), marble, yachts, pan masala | Vice-related services |
- Cess Examples: Tobacco (36% + cess up to 290%), motor vehicles (28% + 15-22% cess).
Special Rates
- 3%: Gold, silver, platinum, jewelry (precious metals).
- 0.25%: Rough/semi-precious stones, diamonds.
- Composition Levy: 6% for mixed suppliers (up to ₹1.5 crore turnover).
Recent GST Rate Revisions (2024-2025)
The 54th and 55th GST Council meetings focused on corrections:
- Inverted Duty Fixes: Reduced rates on inputs to match outputs (e.g., textiles, chemicals).
- Revenue Augmentation: Increased on some luxury items.
- Specific Changes: Millet flour (70% millets): 0% loose, 5% packaged; popcorn variants differentiated (plain 5%, caramel 18%).
- No Major Hikes: Emphasis on MSME relief; e-commerce TCS cut to 0.5%.
As of now, no full GST 2.0 implementation; notifications pending for December 2024 changes.
Proposed GST 2.0 Reforms: What to Expect by Diwali 2025
GST 2.0 is positioned as a “game-changer” for economic growth, targeting a $10 trillion economy by 2047. Key proposals from the PM’s announcement and GoM deliberations:
- Simplified Slabs: Reduce to 0%, 5%, and 18%. Eliminate 12% (99% items to 5%) and 28% (90% to 18%). New 40% for 5-7 sin goods (tobacco, alcohol-related).
- Rate Reductions:
- Essentials/Packaged Food: To 5% (e.g., FMCG sachets <₹10).
- Electronics/White Goods: From 28% to 18% (ACs, TVs, fridges, cement—boosting manufacturing).
- Insurance (Health/Life): Rationalized to lower rates (potentially 5-12%).
- Textiles/Fertilizers: Fixes for inverted structures to free working capital.
- Structural Changes:
- Pre-filled returns, faster refunds (within 30 days), AI-driven compliance.
- MSME Focus: Easier registration, lower thresholds, inclusion of petroleum/fuel (long-pending).
- End Compensation Cess by March 2026.
- Economic Impact: Expected to cut prices by 5-10% on daily goods, increase disposable income, formalize unorganized sector, and expand tax base. Sectors like automobiles, renewables, and agriculture to benefit.
- Timeline: GoM report by September end; Council approval in October; rollout by Diwali (late October/early November 2025). A task force will oversee “next-gen” features like digital invoicing 2.0.
Challenges include state consensus (revenue-sharing concerns) and implementation glitches, but experts hail it as a step toward a two-tier system like many developed economies.
Implications for Businesses and Consumers
For consumers, GST 2.0 could mean cheaper groceries, gadgets, and insurance premiums, enhancing purchasing power amid inflation. Businesses, especially MSMEs (99% of India’s enterprises), gain from simpler compliance—reducing litigation (over 50,000 cases pending) and costs. However, luxury sectors may face the 40% hit. Track updates via the official GST portal (cbic-gst.gov.in) or apps like the GST Rate Finder.
In conclusion, while current rates provide stability, GST 2.0 promises a leaner, fairer system. As the Council deliberates, stakeholders must prepare for recalibrating pricing and supply chains. This reform isn’t just about taxes—it’s about accelerating India’s growth story.
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Sources:
- ClearTax, August 24, 2025
- Times of India, August 15, 2025
- Bajaj Finserv, June 23, 2025
- SAG Infotech Blog, August 21, 2025
- Razorpay Learn, May 14, 2025
- CBIC GST Portal, September 3, 2025
- Global VAT Compliance, August 19, 2025
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