Union Finance Minister Nirmala Sitharaman has said that the sweeping Goods and Services Tax reforms that come into effect from September 22, 2025 will leave about ₹2 lakh crore more in the hands of Indian households, boosting domestic consumption significantly. Speaking at the 80th anniversary of the Tamil Nadu Foodgrains Merchants Association in Madurai, she emphasized that the simplification from the earlier four tax slabs to two—5% and 18%—is meant to ensure that the poor, middle-class families, and MSMEs benefit most from the changes.
Sitharaman explained that the new “GST 2.0” structure will move almost all items taxed at 12% into the 5% category, and a large portion of those taxed at 28% into the 18% slab. Essential items such as everyday household goods, certain foods, and agricultural inputs will see sharp reductions in tax rates, while the higher slab will apply to standard goods. There will also be a 40% rate reserved for luxury and “sin” goods—such as tobacco, pan masala and aerated drinks—but the implementation of that higher rate for some of these items will be phased.
She said that because of the two-slab structure, many goods consumers buy regularly will become cheaper, encouraging greater spending. Industries are expected to respond by increasing production, thereby creating more jobs and expanding the tax base. Sitharaman pointed out that entrepreneur registrations under GST have risen sharply since 2017: from about 65 lakh to 1.51 crore, which she says reflects growing participation in the formal economy.
The government is also easing procedural burdens: registration and return filing processes will be simplified, refunds sped up, and compliance for MSMEs reduced. These reforms follow decisions taken at the 56th GST Council meeting, and official notifications have been issued to operationalize the changes.
Critics, however, have questioned why the rate-cuts have taken eight years to implement and whether the benefits will reach all categories of consumers equally. Some business analysts warn that while the tax burden will fall on many products, certain goods still in higher slabs or under the luxury/sin category may not see relief, and the timing of adjustments will matter for low income households.
Overall, the government’s claim is that GST 2.0 will stimulate demand, improve affordability, and ensure that taxation is simpler, fairer, and more inclusive, especially for those who were previously bearing heavier indirect tax burdens.
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