GST 2.0
Effective from: Midnight, September 22, 2025
Announced after: 56th GST Council Meeting (September 3, 2025)
WHY IN NEWS?
- The Government of India launched a massive GST rate restructuring, known as GST 2.0, affecting 375+ common-use goods and several services.
- Key consumer products now fall under lower GST slabs — aimed at boosting household budgets, reducing inflation, and stimulating demand.
- PM Modi has called this a “GST Savings Festival”, encouraging full benefit pass-through to consumers.
WHAT IS CHEAPER & BY HOW MUCH?
KEY FEATURES
| Category | Previous GST Rate | Revised GST Rate |
| Essential food items (Paneer, Butter, Cheese, etc.) | 5%–18% | 0%–5% |
| Processed food (Cornflakes, Biscuits, Ice Cream) | 12%–18% | 5% |
| Household essentials (Shampoo, Toothpaste, Soap) | 18% | 5% |
| Cement | 28% | 18% |
| Insurance (Health & Life) | 18% | 0% |
| Small Cars | 28% + Cess | 18% (No Cess) |
| Large Cars | Up to 50% (including cess) | 40% Flat |
| Durables (ACs, Dishwashers) | 18% | 12%–15% |
IMPACT ON HOUSEHOLD ITEMS
| Product | Old Price | New Price | % Drop |
| Amul Paneer (200g) | ₹95 | ₹92 | ↓3% |
| UHT Milk (1L – Amul/Mother Dairy) | ₹83/77 | ₹80/75 | ↓3–4% |
| Butter Khakhra (200g) | ₹100 | ₹95 | ↓5% |
| Cheese Onion Paratha | ₹240 | ₹200 | ↓17% |
PACKAGED FOODS & SNACKS
| Product | % Price Reduction |
| Pringles (107g) | ↓12% |
| Kellogg’s Corn Flakes (900g) | ↓11% |
| Sunfeast Marie Light Biscuits (1kg) | ↓12% |
| Ice Cream (50ml cup) | ₹10 → ₹9 (↓10%) |
| Butterscotch Cone (100ml) | ₹35 → ₹30 (↓14%) |
| Product | Price Drop |
| Shampoos, Soaps, Toothpastes | ↓11–13% |
| Brands: L’Oréal, Dove, Himalaya, Close-Up | Lower MRP announced |
IMPACT ON CONSTRUCTION & HOUSING
- Cement: GST reduced from 28% → 18%
- Key for infrastructure, MSMEs, and rural housing
- Major producers (JK Cement, UltraTech) have confirmed full pass-through.
- Expected Price Drop: 8–10% per 50 kg bag
IMPACT ON AUTOMOBILE SECTOR
| Vehicle Type | Tax Before | Tax Now | Price Cut |
| Small Cars | 28% + Cess | 18% | ₹46,000 – ₹1.29 lakh |
| Bigger Cars | 50% | 40% | ₹1.5 – ₹3 lakh (varies) |
| Issues | Dealers facing ₹2,500 crore loss on unsold older inventory |
IMPACT ON INSURANCE
| Policy Type | Old GST | New GST | Savings |
| Health & Life Insurance | 18% | 0% (Exempt) | ↓Up to 15% on annual premiums |
IMPACT ON CONSUMER DURABLES
| Product | Price Reduction |
| 1 Ton Air Conditioners | ₹4,509 – ₹5,259 |
| Dishwashers | ₹3,282 – ₹4,336 |
| Refrigerator, Washing Machine | Expected cuts in next wave |
ECONOMIC & FISCAL IMPLICATIONS
Boost to Consumption
- FMCG and consumer durable sectors likely to see double-digit volume growth in Q3 & Q4 FY26
- May add 2–0.3% to GDP growth due to demand revival
Lower Retail Inflation
- Especially in food & housing components of CPI
- Gives monetary policy space to RBI for rate decisions
Fiscal Impact
- Short-term dip in GST collections may be offset by higher consumption volumes
- Strengthens GST’s pro-poor, pro-consumer orientation
WAY FORWARD
- Strict Monitoring by GST officers to ensure complete pass-through to consumers.
- Extend rate rationalisation to input services to avoid credit accumulation.
- Consider revisiting inverted duty structure in textiles, footwear, electronics.
- Launch GST 2.0 awareness campaign for SMEs, traders, and consumers.
Note: Connect with Vajirao & Reddy Institute to keep yourself updated with latest UPSC Current Affairs in English.
Note: We upload Current Affairs Except Sunday.