The 56th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, has kicked off with sweeping “next-gen” reforms on the agenda. Billed as GST 2.0, the overhaul aims to go far beyond routine rate tweaks, promising structural clarity and easier compliance for businesses.
The big-ticket proposal is a simplification of tax slabs: the existing four-tier system could be reduced to just two primary rates — 5% for essentials and 18% for standard goods — while a 40% levy is being considered for luxury and “sin” items. If approved, nearly all items in the current 12% slab could move down to 5%, and most goods taxed at 28% may drop to 18%, offering significant relief to consumers.
Reforms also target long-standing anomalies, such as inverted duty structures and confusing classifications like parotta vs. roti. Small businesses and MSMEs are expected to benefit from pre-filled returns, automated refunds, and smoother registrations, making compliance far less burdensome.
Sectors such as FMCG, automobiles, electronics, cement, and personal care are seen as the big winners, while lower GST on everyday items and insurance is expected to ease household budgets just in time for Diwali. But some states remain worried about revenue shortfalls and are pressing for compensation or additional levies on luxury goods.
With Prime Minister Modi’s Independence Day promise of a Diwali tax relief in sight, experts believe GST 2.0 could boost consumption and cushion India’s economy from global headwinds. Final decisions on slab realignment, state compensation, and rollout timelines are expected within the next 48 hours — with early October launch flagged, just ahead of the festive season.
