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?

GST 2.0 explained for UPSC GST 2.0 explained for UPSC GST 2.0 explained for UPSC GST 2.0 explained for UPSC

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.