India’s government has rolled out GST 2.0, a sweeping overhaul of the nation’s indirect tax regime, ahead of the Bihar elections, signalling both economic reform and political strategy.
The four-tier structure of 5, 12, 18, and 28 per cent has been simplified to two core slabs, 5 and 18 per cent, alongside a 40 per cent levy on luxury and ‘sin goods’.
The middle class, accounting for nearly a third of India’s population, stands to benefit significantly.
Essential daily items such as soaps, toothpaste, shampoos, and stationery now attract a 5 per cent GST, down from 12–18 per cent.
The government has taxed aspirational goods, including small cars, LED TVs, air conditioners, and cinema tickets, at 18 per cent.
Healthcare outlays are also addressed, with life and health insurance premiums exempt and 33 life-saving drugs now tax-free. Analysts note these concessions could help the government retain middle-class goodwill in a crucial electoral battleground.
Farmers & Rural Economy Protected
GST 2.0 also prioritises India’s agrarian economy. Tax reductions on farm equipment, ghee, butter, paneer, jams, dry fruits, and other rural staples have lowered rates to 5 per cent.
The government has maintained protective measures for agriculture and dairy during trade discussions, shielding domestic producers from foreign competition.
In line with its public health agenda, the government has introduced a 40 per cent ‘sin tax’ on tobacco, pan masala, gutkha, aerated and sugary caffeinated beverages, encouraging healthier choices.
Simultaneously, GST 2.0 aims to boost domestic manufacturing by favouring locally produced cosmetics, handlooms, and woven fabrics, reinforcing the Atmanirbhar Bharat initiative.
With Diwali approaching, the reform also serves as a festive relief measure, offering financial respite to households while energising local businesses.
Economists suggest the timing and structure of GST 2.0 reflect a calculated balance of economic policy and political messaging.
Also Read: GST 2.0 Becomes The ‘Great Savings Tax’ As Modi Government Cuts Rates On Essentials
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