Indian taxpayers will see a new GST 2.0 structure with two primary slabs of 5% and 18%. Ultra-luxury items will be taxed at 40%, while tobacco remains at 28%. PM Modi highlighted the reforms as crucial for economic growth and urged support for indigenous products.
Indian taxpayers will experience a shift in the Goods and Services Tax (GST) structure, as the revamped GST 2.0 comes into force. The new system simplifies the tax regime with just two primary slabs- 5% and 18%, covering the majority of goods and services.
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Ultra-luxury items will now be taxed at 40%, while tobacco and related products will remain under the 28% slab plus cess.
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Speaking on Sunday, Prime Minister Narendra Modi described the reforms as a major milestone for "Aatmanirbhar Bharat", emphasising that it will accelerate India's economic growth.
He urged citizens to support 'swadeshi' (indigenous) products, linking them to national prosperity. "A GST bachat utsav (savings festival) will begin tomorrow. You'll be able to buy the things you like more easily," PM Modi said, adding that the changes would benefit the poor, middle class, youth, farmers, women, traders, and shopkeepers alike.
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While most items under GST have seen rate cuts, some limited items will now also be dearer with higher tax rates. Clothes priced above ₹2,500 will now attract a higher GST rate of 18% compared to 12% before.
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The price drop is expected to boost sales, especially with the festive season approaching -- a time when demand for home appliances traditionally spikes.
The introduction of the new two-slab GST structure marks the most significant tax rationalisation since the Goods and Services Tax was first implemented in July 2017, which initially featured four slabs: 5%, 12%, 18%, and 28%.
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Under the updated system, only two main slabs, 5% and 18%, will apply to most goods and services. Ultra-luxury items and sin goods remain in higher tax brackets.
Policymakers say this simplified framework will make the tax system more efficient, transparent, and consumer-friendly, staying true to the original GST vision of promoting affordability and broader consumption.
The timing of the reform is also politically significant. Just weeks earlier, Prime Minister Narendra Modi had promised a "Diwali gift" in the form of GST reforms during his Independence Day speech. The GST Council's decision now fulfils that pledge, setting the stage for a consumption-driven economic boost as the festive season kicks off.