GST 2.0: Modi Government Unveils Two-Slab Tax Regime as Diwali Gift

Major Overhaul in GST Structure

In a landmark reform dubbed GST 2.0, the Modi government has reduced the Goods and Services Tax (GST) slabs from four to two, calling it a Diwali bonanza for the common man. The GST Council announced that the earlier 5%, 12%, 18%, and 28% brackets will now be simplified into:

• 5% base rate for essentials

• 18% standard rate for most other goods
  Additionally, a 40% slab will remain in place for luxury, sin, and environmentally harmful items.

Relief for Households Struggling with Inflation

This move aims to ease financial pressure on families, especially as inflation continues to bite. For instance, a product priced at ₹100 earlier taxed at 12% (₹112) will now cost just ₹105 under the 5% rate—a saving of ₹7 on every ₹100 spent. With a large chunk of daily-use items falling in the old 12% bracket, household budgets are set to see noticeable relief.

Kitchen & Household Essentials Get Cheaper

Staples and home necessities previously taxed at 12% will now attract only 5% GST. These include:

• Dairy products like butter, ghee, cheese, and namkeen

• Baby nappies, utensils, sewing machines, glucometers, and oxygen supplies

• Irrigation systems, bio-pesticides, tractors, and farm equipment

The change benefits both homemakers and farmers, making essentials more affordable.

Big Cuts from the 18% Slab

In a surprising shift, many products from the 18% slab have also moved down to 5%. Items such as:

• Toothbrushes, shaving creams, toilet cleaners, thermometers

• Tractor tyres and spare parts

Additionally, the government has completely waived GST on health insurance, term insurance, and ULIPs, making healthcare and financial protection cheaper for the middle class.

Food & Snacks Turn Sweeter

The snack aisle and packaged food sector will see dramatic relief:

• Zero-rated items: packed paneer, chhena, roti, chapati, khakhra, and pizza bread

• Now at 5% GST: nuts (almonds, pistachios, dates), fish, sugar, coconut products, juices, and baking powders

• Reduced from 18% to 5%: chocolates, biscuits, cakes, pastries, jams, soups, coffee, and cornflakes

This ensures that even indulgences won’t pinch pockets as much.

Crackdown on Luxury & Sin Goods

While essentials have become cheaper, the government has increased GST to 40% on vices and extravagances, including:

• Cigarettes, gutkha, pan masala, and tobacco products

• Carbonated and caffeinated drinks

• SUVs, luxury motorcycles, and private aircraft

This is expected to both discourage harmful consumption and generate additional revenue.

Experts Hail the Move

Economists see the new GST regime as both a populist and pragmatic step. By streamlining slabs, compliance for businesses will be simpler, while consumption of essentials may rise. At the same time, higher taxes on harmful products balance out revenue losses from reduced GST on essentials.

What It Means for Families

For the average Indian household, GST 2.0 translates into:

• Cheaper grocery bills

• Reduced costs for health and insurance products

• Higher expenses only for luxury and harmful goods

As the changes take effect, families can expect a fuller shopping basket at lower prices, a much-needed relief during rising living costs.