Daybreak - All you need to know about GST 2.0

Episode Date: September 4, 2025

India is rolling out the biggest reform to its Goods and Services Tax since 2017. The GST Council has approved a new structure that takes effect on September 22. It will reshape how everything from household essentials to cars, insurance, and services are taxed. The government says GST 2.0 will simplify compliance and lower costs, but several states warn of heavy revenue losses and economists question the design. Markets have already responded with key sectors moving sharply. In this episode we go over what changes, who benefits, who loses, and whether GST 2.0 can deliver on the promise of a simpler tax system.Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. India has just rewritten the way we pay taxes on almost everything that we buy. From soaps to cars to biscuits to television to even your morning toothpaste.

The price of hundreds of everyday items are about to change and it all starts on the 22nd of September. Now, this is not just a small tweak. The GST Council has approved what it calls GST 2.0, which is the biggest change since the goods and services tax was first launched back in 2017. Now, instead of four different tax slabs, there will be just two main ones, 5% and 18%. and a third much higher slab, 40% only for luxury and harmful products. The government is saying that this overhaul will simplify taxes, cut prices on essentials and fix a long-standing headache for businesses. Small shops and startups are promised easier registrations and markets are already hailing it. Finance Minister Nirmada Sita Raman, while announcing the reform, said that these changes have been made with a focus on the common manner.

But critics say that it could cost states thousands of crores of rupees in revenue. Some economists believe that news slabs still do not go far enough. And the question that many of them are asking is this. Is JST 2.0 really simpler or just simpler on paper? So in this episode, we're going to unpack it all. What gets cheaper, what gets costlier, how small businesses and markets are reacting, and why some states are sounding alarm bells. Because this reform does not.

not just decide what governments earn, it decides how much each of us spends every single day. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Das Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Vargis and I will bring you one business story that is worth understanding and worth your time. Today is Friday, the 5th of September. So, what's actually changing? The big headline, as you all must have read already is that India is moving to a two slab GSD system, 5% and 18%, and a steep 40% slab reserved for things like luxury cars, aerated sugary drinks and tobacco products. So let's start with what becomes cheaper. Food items like fruit juices, pasta, soy milk, nuts, condensed milk, butter, cheese,

all drop from 12% to 5%. And ultra-high temperature milk, paneer, pizza, bread, kakra, chapas, and even erasers now face no tax at all. Your personal care shelf will feel lighter too. Hair oil, soaps, shampoes, toothbrushes, toothpaste all down to just 5%. Bicycles, kitchenware, tableware, all again 5%. And then the bigger ticket items like ACs, TVs, refrigerators, dishwashers, they will all move from a steep 28% slab to 18%. And that is a big change. Small cars also come down to 18%. This includes petrol engines up to 1,200-c, diesel up to 1,500-cc and under 4 metres in length. Motorcycles under 350-c and auto parts also fall into 18%.

And electric vehicles or EVs will stay at an attractive 5%. Now, the flip side. Not everything is cheaper. Aviated beverages with added sugar like your colas and your sodas, jump from 28% to 40%. Coal will also become costlier rising from 5% to 18%. And luxury cars, tobacco products and pan masala will eventually face the 40% slab

once pending dues are cleared. The idea behind all of this the government is saying is to fix what is called an inverted duty structure. That is when inputs are taxed more than the final products which traps businesses in refund cycles. With fewer slabs and clear runs, rates, the system could be easier to run, easier to comply with and less likely to spark disputes.

For consumers, all of this means more clarity and no more confusion whether soap is 12% or 18%. It's just 5% clear and simple. More on the impact and criticisms of GSD 2.0 in the next segment. So what does this mean for different groups? Let's start with small businesses. The government has introduced a simplified. JST registration scheme. If you are a low-risk business, not claiming more than 2.5 lakh

rupees per month in input tax credit, you can now get registered in just three working days. That is expected to cover about 96% of all new applicants. For smaller traders, Kirana stores and startups, that is a big deal. Less paperwork, less waiting, and faster entry into the system. For consumers, analysts expect many everyday products to build. become 10 to 15% cheaper. And that is especially important because we are heading into the festive season now. And for the economy, there is hope that this will ease inflation by as much as 1.1 percentage points. The logic is simple. Cheaper goods means higher consumption and that creates a ripple effect across industries. And the markets certainly welcomed it. On day one of the announcement,

which was yesterday, both the Censex and Nifty jumped nearly 1% in early. trade. Auto and FMCG stocks were clear winners. And the Nifty Auto index rose about 2%, and FMCG gained over 1.5%. IT and PSU stocks dipped a little, but overall, the sentiment was strongly positive. Some analysts have gone ahead and called the reforms even revolutionary. But there are concerns. Several states say that they stand to lose big. The center is expected to forego around 48,000 crore rupees in revenue. And opposition rule states warned that the combined hit could be as high as 2 lakh crore rupees. Jharkand alone estimates that it has already lost more than 16,000 crores under GST since 2017, and it could lose more than 60,000 crore rupees again by

2029 unless it is compensated. Veteran economist Montek Singh al-Alualia has questioned whether a 5% slab is even necessary. He said that it is too low. He argued that a single rate, around 14%, would be simpler and more sustainable. And then there is also the structural worry. Even with fewer slabs, GST still faces classification disputes, filing glitches and mismatches in input tax credits. Critics have warned that if these aren't fixed, the new system could end up with the same frustrations, just with different numbers on the slabs. So, where does this leave us all?

GST 2.0 is bold, yes. It simplifies slabs, eases life for small businesses, and cuts prices on a whole range of everyday essentials. It has given a boost to stock markets and raised hopes of stronger consumption. But it also leaves behind big questions. Will states be compensated for revenue losses? Will the new system avoid the same old disputes? And is two slabs really enough or just a halfway step? But what is clear from this is that from September 22nd,

the way we buy and sell in India is going to look different. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted and produced by my colleague Snitha Sharma and edited by Rajiv Sien.