GST 2.0: Relief For Citizens, Boost For Industry

By exempting essential consumables such as milk, paneer, and parathas, and eliminating GST on life-saving pharmaceuticals, the Council has delivered immediate and meaningful relief to households, reaffirming the government’s enduring commitment to public welfare.

The reduction of GST rates on critical infrastructure enablers, including cement, motorcycles, buses, trucks, and televisions, from 28 per cent to 18 per cent, signals a deliberate push toward affordability, capital formation, and investment-led growth. 

Concurrently, the standardisation of auto components under a uniform 18 per cent rate introduces long-awaited clarity and coherence to the mobility ecosystem.

Structural inefficiencies have been addressed with precision. The rationalisation of inverted duty structures in textiles and fertilisers through a unified 5 per cent rate is expected to unlock input tax credits, streamline production cycles, and enhance India’s global competitiveness. Continued concessions for agriculture and renewable energy sectors underscore the nation’s dual commitment to sustainability and rural empowerment.

Insurance, MSMEs, 'Sin Goods'

Insurance has emerged as a pillar of financial inclusion, with full GST exemptions on select health and life policies poised to expand coverage and deepen social protection. In a decisive anti-evasion measure, GST on chewing tobacco and similar products will now be levied on the retail sale price (RSP), curbing under-invoicing and reinforcing tax equity.

Procedural enhancements, including simplified registration protocols and accelerated refund mechanisms, promise to ease compliance burdens for MSMEs, improve liquidity, and foster entrepreneurial momentum.

To balance relief with responsibility, the Council has sanctioned elevated levies, up to 40 per cent, on luxury vehicles, aerated beverages, and tobacco products, reflecting a calibrated approach to fiscal prudence and public health imperatives.

Intermediary Services

In a transformative move for service exporters, the Council’s recommendation to omit Section 13(8)(b) of the IGST Act redefines the place of supply for intermediary services, aligning it with the recipient’s location.

This long-awaited correction unlocks zero-rated export status for Indian intermediaries, enabling the refund of input taxes, enhancing global competitiveness, and harmonising domestic tax law with international trade norms.

By removing one of the most litigated provisions under GST, it is expected to drastically reduce the number of disputes and uncertainty. It marks a decisive shift toward a destination-based taxation regime, and affirms India’s commitment to nurturing its service economy.

New GST Synchronised With FTAs

Crucially, these reforms are synchronised with India’s evolving geopolitical and trade architecture. As the country expands its network of Free Trade Agreements and recalibrates customs frameworks to bolster global competitiveness, the GST rationalisation ensures domestic tax policy remains harmonised with international trade norms.

This strategic convergence fortifies India’s position within global value chains, mitigates tariff asymmetries, and reinforces its commitment to a transparent, rules-based, and growth-oriented trade ecosystem.

Above all, the spirit of cooperative federalism prevailed. The unanimous adoption of these reforms by the Centre and all states reflects a shared resolve to place citizens at the heart of policy and to align GST with India’s long-term developmental aspirations.

Industry stakeholders must now undertake a comprehensive impact assessment of the revised rate, both on output and input sides, and recalibrate pricing structures to ensure compliance with anti-profiteering norms.

A timely review of distribution and supply chain models, coupled with swift implementation of IT system updates, will be imperative to operationalise the new rates by the effective date of September 22.

(The writer is Partner - Tax Planning & Optimisation, Grant Thornton Bharat. Views are personal)