PM Narendra Modi launches GST 2.0 on Navratri, calls it a ‘Festival of Savings’ for common people
- MGMMTeam
- 1 day ago
- 4 min read
India has entered a new phase of indirect taxation with the launch of GST 2.0 on September 22, 2025, coinciding with the beginning of Navratri. The reform, described by Prime Minister Narendra Modi as a “Bachat Utsav” or “festival of savings,” aims to simplify the tax structure, cut rates on a wide range of goods and services, and stimulate consumer demand. The new regime has immediate implications for households, businesses, and state finances, with the promise of boosting economic activity during the festive season.
Simplification of Tax Structure
One of the most significant aspects of GST 2.0 is the rationalisation of tax slabs. The earlier system, which had four primary brackets—5%, 12%, 18%, and 28%—has been replaced with a two-tier structure. Most essential goods now fall under the 5% category, while the majority of standard goods and services are taxed at 18%. At the upper end, a 40% rate has been introduced for ultra-luxury and demerit goods, while some products like tobacco remain in the 28% slab with cess. This streamlining is expected to reduce disputes over classification, improve compliance, and make the system easier for businesses to navigate.
Relief for Consumers
The reforms bring widespread price cuts that are expected to benefit households across the country. Daily essentials such as paneer, butter, jams, dry fruits, snacks, and ice cream are now taxed at lower rates, making them more affordable. Consumer durables like refrigerators, televisions, washing machines, and air conditioners also see reduced prices, making aspirational goods more accessible to the middle class.
The health sector has gained particular attention, with medicines largely shifted from 12% to 5%, and several life-saving drugs for cancer and rare genetic conditions exempted entirely. Moreover, health and life insurance premiums are now free of GST, reducing financial burdens for policyholders. These measures reflect a strong consumer-centric orientation in the government’s approach.
Boost for the Automobile Sector
The automobile industry stands out as one of the biggest beneficiaries of GST 2.0. Cars under four meters, previously taxed at 28%, now fall under the 18% bracket. This change has immediately translated into lower showroom prices, in some cases reducing costs by more than ₹1 lakh. Two-wheelers, a crucial mode of transport for India’s middle class, also see substantial tax relief.
Manufacturers expect these reductions to trigger fresh demand across both urban and rural markets. The government hopes that renewed consumer interest in automobiles will boost production, generate employment, and support the broader manufacturing ecosystem, including auto parts and ancillary industries.
Impact on Hospitality, Tourism, and Agriculture
Beyond consumer goods and automobiles, other sectors are also set to gain. In hospitality and tourism, hotel stays that were taxed at 12% will now attract a lower 5% rate, potentially encouraging domestic travel. The agricultural sector benefits from reduced taxes on farm tools and equipment, which may lower costs for farmers and increase rural adoption of modern technologies. Together, these changes highlight the government’s attempt to address both urban and rural economic needs.
Concerns from States
While the reform has been welcomed by many consumers and industries, state governments have voiced concerns over potential revenue losses. States like Telangana and Kerala estimate significant shortfalls running into thousands of crores and are seeking central compensation. This raises the challenge of balancing fiscal stability with the broader economic benefits of tax reduction. The success of GST 2.0 will depend in part on how the centre and states negotiate this financial adjustment.
Economic Implications
Economists predict that GST 2.0 could give a strong push to consumption, especially during the festival season, which is traditionally a period of high spending. The reduction in prices across essentials, durables, and vehicles is likely to ease inflationary pressures, benefiting households at a time of global economic uncertainty. Additionally, the simplification of slabs may drive more businesses into the formal economy, improve compliance, and reduce tax leakages. However, sectors such as premium apparel, which have seen rates rise, may face headwinds in demand.
Prime Minister’s Call for Swadeshi
Alongside the tax reform, Prime Minister Modi has appealed to citizens and shopkeepers to promote “Made in India” products, using slogans like “what we buy is Swadeshi, what we sell is Swadeshi.” This push for domestic products aligns with the government’s larger economic vision of encouraging local manufacturing, strengthening self-reliance, and turning India into a global hub for innovation and production.
The MGMM Outlook
The launch of GST 2.0 by Prime Minister Narendra Modi on Navratri represents a major step in making India’s indirect tax system simpler and more consumer-friendly. By rationalizing tax slabs into a two-tier structure and lowering rates on essential goods, consumer durables, automobiles, health services, and even insurance, the reform aims to reduce costs for households and make aspirational products more accessible. The immediate price relief on items ranging from daily essentials to cars and two-wheelers is expected to boost demand across urban and rural markets. Sectors like hospitality, tourism, and agriculture also stand to benefit from reduced taxation, reflecting a balanced approach to supporting both urban consumption and rural livelihoods.
From an economic perspective, GST 2.0 is likely to encourage greater consumer spending during the festival season while improving compliance and reducing disputes over classification. The government’s push for “Made in India” products further complements the reform by promoting local manufacturing and self-reliance. While some states have raised concerns about potential revenue losses, the overall policy direction signals a strong pro-consumer and growth-oriented vision, aimed at energizing the economy and strengthening India’s position as a global manufacturing and innovation hub.
(Sources: Hindustan Times, LiveMint, Indian Express)
Comments