GST 2.0 Arrives on 22 September 2025: What Businesses and Consumers Must Know

Why This Matters

After years of debate, India is rolling out a leaner two-slab GST—5% and 18%—alongside a 40% “sin-goods” rate. The change is designed to simplify compliance for 14 million GST registrants and put extra cash in consumers’ wallets ahead of the festive season.

 

Key Rate Changes at a Glance

Goods/Services	Old Rate	New Rate (22 Sep)	Real-World Effect
Packaged food, soaps, shampoos	18%	5%	FMCG companies planning MRP cuts; expect 10-15% lower shelf prices
Small passenger cars (≤1,200 cc)	28%	18%	Auto makers offering festive discounts plus GST savings
LED TVs, refrigerators, ACs	28%	18%	Electronics retailers anticipate double-digit demand spike
Life & health insurance premiums	18%	0%	Policies become cheaper; penetration likely to rise
Luxury cars, tobacco, energy drinks	28%	40%	Prices jump; revenue neutrality maintained

 

What Gets Exempted

• 33 life-saving drugs
• Plain dairy products (milk, curd, paneer)
• Basic educational supplies

These items slide to the NIL bracket, shaving an estimated 0.15 percentage points off headline inflation.

Also Read: Income-Tax Trends to Watch in India (2025-26)

Transitional Rules You Cannot Ignore

1. Time of Supply
   Bills and payments received on or after 22 September attract the new rates. Split advances across old/new slabs if relevant.
2. Re-labelling Unsold Stock
   The government allows manufacturers to over-sticker MRPs till 31 December 2025 without penalty. Keep records of price revisions for audit.
3. Input Tax Credit (ITC)
   No break in ITC chain if you issue supplementary invoices for rate-differential. Use Section 153A memo format to document adjustments.

Also Read: GST Exporter Refund – A Detailed Overview

Economic Rationale

The National Institute of Public Finance & Policy estimates a fiscal multiplier of −1.08 for GST cuts—higher than comparable direct-tax tweaks—meaning every rupee of foregone GST could add more than a rupee to GDP. With record gross GST collections of ₹22.08 lakh crore in FY 2024-25, the exchequer can absorb the near-term revenue dip.

Also Read: GST Refund Appeal Rules 2025

Action Checklist for Businesses

• Update ERP/e-invoicing software with new HSN-to-rate mapping before 22 September.
• Re-negotiate contracts whose consideration spans the cut-over date to avoid disputes.
• Communicate new MRPs down the distribution chain—dealers, e-commerce platforms, and end-customers.
• Train accounts & sales teams on revised GST classifications.
• Monitor GSTN portal for any last-minute clarifications or rule tweaks.

Also Read: September 2025’s Break-Out Trend: India’s Dual-Rate GST Overhaul

Outlook: Simpler Tax, Bigger Market

GST 2.0 is the first significant structural overhaul since 2017. If executed smoothly, it could:

• Lower compliance cost, especially for MSMEs.
• Spur consumption in mass-market categories by reducing price tags.
• Shift discretionary spend away from luxury items toward everyday goods.
• Enhance India’s tax buoyancy once higher volumes offset rate cuts.