Since its launch in 2017, the Goods and Services Tax (GST) has aimed to simplify India’s complex indirect tax system. Over time, however, GST developed too many slabs—0%, 5%, 12%, 18%, 28%—which created confusion for businesses and consumers alike. To solve this, the government introduced GST 2.0 on 22 September 2025, making it simpler, fairer, and more consumer-friendly.
The main highlight of GST 2.0 is a restructured tax slab system with 0%, 5%, 18%, and 40% categories. Let’s see how this impacts your everyday life.
The most significant change under GST 2.0 is the sharp reduction in tax for essentials and consumer durables. Daily essentials like soap, shampoo, and toothpaste have dropped drastically from 18% to the 5% slab, resulting in approximate savings of ₹26 on a ₹200 product. Similarly, most packaged food items, including butter, ghee, cheese, and namkeen, have moved from the 12%-18% bracket down to 5%. Even better, many fresh food items like paneer, khakhra, and paratha are now 0% (Exempt), eliminating the previous 5% tax.
Consumers will see major savings on high-value items, too. Home appliances such as ACs, refrigerators, and large TVs (above 32") have moved from the highest 28% bracket to the 18% standard rate, potentially saving a consumer around ₹2,500 on a ₹25,000 washing machine. A small or mid-sized car (under 1200cc) also sees a tax cut from 28% to 18%, which could translate to savings of up to ₹70,000 on the purchase price.
Further relief is provided in the areas of well-being and education. Life and health insurance premiums, previously taxed at 18%, are now 0% (Exempt). Even services like salon visits and gym memberships have dropped from 18% to 5%. Finally, most education materials including notebooks, pencils, and maps, which were taxed at 5%–12%, are now entirely 0% (Exempt), reducing the cost of school supplies. Conversely, luxury and sin goods, such as luxury cars and aerated drinks, are now consolidated under a steep 40% rate.
Essentials and Food Products: Cheaper for Every Household
One of the biggest changes is on daily food items. Earlier, many packaged foods carried 12% or even 18% GST, which increased grocery bills. Under GST 2.0:
➣ 0% GST → Fresh food, paneer, khakhra, parathas, basic flour, milk, fruits, vegetables.
➣ 5% GST → Butter, ghee, cheese, dry fruits, fruit juices, jams, honey, packaged foods.
👉 Example: A packet of butter priced ₹100 earlier cost ₹112 (with 12% GST). Now, with 5% GST, it costs ₹105. That’s ₹7 saved on each pack.
This change directly benefits families, especially middle-class households, as monthly grocery costs come down.
Personal Care and Daily Use: Major Savings
Personal care items have seen one of the biggest tax cuts.
➣ Earlier: 18% GST on soaps, shampoos, toothpaste, hair oil, shaving items.
➣ Now: 5% GST.
👉 Example: A shampoo bottle costing ₹200 earlier had ₹36 tax (18%). Now, with 5%, it’s only ₹10. That’s a saving of ₹26 per bottle.
This change ensures that basic hygiene products are affordable for all.
Healthcare and Insurance: Affordable Protection
Healthcare often puts stress on families. GST 2.0 gives relief by reducing or removing tax on several medical and insurance products.
➣ Medical devices like diagnostic kits and implants: Lower tax rate.
➣ Life and health insurance premiums: Now exempted from GST.
This makes both treatment and medical coverage more affordable, encouraging more people to buy health insurance.
Education Materials: Relief for Students
Education is another area where GST 2.0 provides benefits:
➣ 0% GST → Textbooks, maps, learning charts.
➣ 5% GST → Pencils, erasers, notebooks, stationery.
For parents and students, this directly reduces school expenses. For example, a ₹100 notebook earlier cost ₹118 with 18% GST; now it costs ₹105.
Electronics and Appliances: Mid-Range Goods Cheaper
Earlier, electronics like TVs, ACs, refrigerators, and washing machines were placed in the 28% slab, making them costly. Under GST 2.0:
➣ Most consumer appliances are now under the 18% slab.
👉 Example: A washing machine priced ₹25,000 earlier cost ₹32,000+ after 28% GST. Now, with 18%, it’s about ₹29,500. That’s a saving of nearly ₹2,500.
This is good news for middle-class families upgrading their homes.
Automobiles: Mixed Impact
The automobile sector has seen big changes:
➣ Cheaper vehicles → Small and mid-sized cars (petrol up to 1200cc, diesel up to 1500cc), motorcycles under 350cc now taxed at 18% instead of 28%.
➣ Costlier vehicles → Luxury cars, SUVs, high-capacity motorcycles taxed at a new 40% slab.
So, while common families benefit from lower car and bike costs, luxury buyers pay more.
Luxury and Harmful Goods: Heavier Taxes
To balance revenue and discourage unhealthy consumption, the government moved certain items into the 40% slab:
➣ Tobacco and cigarettes.
➣ Aerated drinks (colas, energy drinks).
➣ High-end cars, SUVs, yachts.
This ensures basic needs get cheaper, while luxuries remain expensive.
Before vs After Snapshot
➣ Before GST 2.0: Too many slabs (5, 12, 18, 28). Bills confusing. Essential items sometimes overtaxed.
➣ After GST 2.0: Fewer slabs (0, 5, 18, 40). Clearer bills. Essentials cheaper. Luxury taxed higher.
Why It Matters to You
For ordinary people, GST 2.0 means:
➣ Lower grocery and hygiene bills.
➣ Cheaper education materials.
➣ Affordable healthcare and insurance.
➣ Clarity on bills with easy-to-read tax rates.
For businesses:
➣ Fewer chances of error in billing.
➣ Simplified filing.
➣ Faster refunds and better compliance.
Conclusion
GST 2.0 is designed to make the tax system fairer. Essentials and daily-use products are cheaper, middle-class families save money, and luxury buyers bear a higher tax burden. In short, your monthly budget will feel lighter, and bills will finally make sense
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