Prime Minister Narendra Modi marked the eve of Navratri by announcing GST 2.0, India’s boldest tax reform since the original GST rollout. Emphasizing that this is the beginning of a “Bachat Utsav” (festival of savings), Modi described the overhaul as a direct push to lower consumer prices, simplify tax compliance, and make India more attractive to global business and investment.
Key Features and Structure of GST 2.0
- Simplified Two-Slab Model: The revised GST collapses the four previous rates into just two main slabs: a 5% rate for essentials and an 18% rate for standard goods and services. A 40% slab is reserved for luxury and sin goods only.
- Widescale Rate Reduction: Nearly all goods previously taxed at 12% shift down to 5%, and most products in the 28% slab drop to 18%. The GST Council’s unified support underscores both Union and states’ commitment to this reform.
- Immediate Impact on Essentials: Core household goods—food, health items, personal care, medicines, insurance, agriculture inputs—fall into the lower slab or receive full exemption. Producers and FMCG giants have quickly responded with price reductions, with cheaper goods hitting shelves nationwide.
Benefits of Bachat Utsav
| Category | Earlier GST | New GST |
|---|---|---|
| Everyday FMCG | 12-18% | 5% |
| Health insurance | 18% | Exempt |
| Home appliances | 28% | 18% |
| Two-wheelers ≤350cc | 28% | 18% |
| Medicines | 12% | 5% |
| Cement, homebuyers | 28% | 18% |
| Services (salons, gyms) | 18% (with ITC) | 5% (no ITC) |
Highlights from PM Modi’s Speech: Vision and Policy Direction
- “Festival of Savings” and Diwali Gift: Modi framed GST 2.0 as a “double Diwali” gift, highlighting the government’s drive for affordability and economic progress: “From tomorrow, you’ll be able to buy your favourite items with ease. This is like a GST saving festival for every Indian.”
- Relief for Households and MSMEs: Modi repeatedly referenced the poor, middle class, MSMEs, and new entrepreneurs as the main beneficiaries. He cited a French tech company’s experience to underscore why making logistics and tax systems efficient is critical for both Indian and foreign businesses.
- “One Nation, One Tax” and Cooperative Federalism: The Prime Minister spotlighted how “hundreds of taxes” and old checkposts slowed economic activity; GST 2.0 is positioned as “one nation, one tax,” achieved through consensus at the GST Council, signaling strong federal unity.
- Next-Gen, Needs-Driven Reform: Modi said: “When time changes, a country’s needs change. Next-gen reforms are essential.” Stressing that future tweaks will be needs-driven, he positioned GST 2.0 as an adaptive, living reform.
Broader Economic Context and Impact
- Global Investment Magnet: By simplifying the tax net, India aims to remove regulatory roadblocks to domestic and foreign investment, with logistics improvements and tax clarity making India more business-friendly.
- Lowering Logistics Costs and Freight Delays: Modi cited World Bank data showing that old logistics delays doubled costs for Indian manufacturers. New GST systems are expected to slash freight times and reduce costs by up to 40% for industries such as textiles.
- “Vocal for Local”, Self-Reliance Push: The Prime Minister urged Indians to take advantage of the festival season by “going vocal for local” and supporting domestic manufacturing, aligning with self-reliance goals.
- Digital Push and Compliance: The new GST system will further rely on digital invoicing, pre-filled returns, and streamlined MSME onboarding.
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What Comes Next
Households, auto buyers, MSMEs—and producers of daily essentials—are immediate winners as GST 2.0 takes effect. The government anticipates a temporary revenue shortfall but projects long-term gains as compliance and consumer demand rise. As Modi’s government positions this as a “Diwali bonus” for the nation, the rollout of GST 2.0 stands out as both a political and economic inflection point for India—a new era of tax simplicity, savings, and growth.
Check out PM Modi’s Latest Speech
