In a decisive move hailed as a significant reform, the GST Council has approved a simplified Goods and Services Tax (GST) structure with just two tax slabs—5% and 18%—to be implemented from September 22. This step replaces the earlier more complex four-tier system of 5%, 12%, 18%, and 28%, aiming to make taxation simpler, fairer, and more growth-oriented across the Indian economy.
Union Finance Minister Nirmala Sitharaman, announcing the reform at a press conference, emphasized that this change is designed with a clear focus on benefiting the common man, farmers, and key sectors driving economic growth. “Every tax on daily use items has undergone rigorous review, with most rates seeing substantial reductions to ease financial burden,” she said.
The reform is not merely about rate rationalization but also about structural changes that enhance ease of doing business and simplify compliance. For example, agricultural machinery including tractors and irrigation equipment will now attract a lower rate of 5%, while luxury and sin goods such as high-end cars, tobacco, and aerated drinks will be taxed at a higher 40% slab to maintain revenue balance.
Industry leaders have welcomed the move, calling it a "game-changer" that will spur manufacturing and consumption demand while simultaneously supporting rural development and labour-intensive industries. The streamlined two-tier system is expected to reduce confusion and disputes over tax classifications, which were often cited as drawbacks of the previous multi-slab structure.
Experts also note that this reform could further improve India's business climate and economic growth by fostering smoother cash flows for MSMEs and ensuring faster refunds through digital filing.
This landmark reform, coinciding with the start of Navratri festivities, hopes to provide timely relief to households and businesses alike, marking a new chapter in India's GST journey since its launch in 2017. With simpler rates and broader exemptions, the GST 2.0 is positioned to boost consumption, support livelihoods, and sustain India’s economic momentum into the years ahead.