India’s indirect tax regime has entered a new phase with the transition to GST 2.0, a framework positioned as a major policy reset aimed at simplifying compliance, rationalising tax slabs and creating a more business friendly structure for companies, MSMEs and individual taxpayers.
Tax Slabs Recast as GST 2.0 Takes Shape
The shift from the original GST framework follows the 56th GST Council meeting in September 2025 and marks a broader effort to move beyond the complexity associated with the earlier regime. The earlier structure, introduced in July 2017, had sought to build a unified tax system but remained burdened by multiple slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent, often with additional cess.
Under the updated framework, a substantial simplification of slabs has been proposed. Most goods previously taxed at 12 per cent have been moved into the 5 per cent bracket, while roughly 90 per cent of commodities that had fallen under the 28 per cent slab have been brought down to the 18 per cent standard rate. To offset the impact on revenue, luxury and so called sin goods, including tobacco products and aerated beverages, have been shifted into a higher 40 per cent tax category.
Several daily essentials have been granted tax free status, including medical insurance premiums, school supplies such as pencils and erasers, and certain educational materials, a move presented as directly easing the cost burden on ordinary citizens.
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Tribunal and Baggage Rule Changes Add Procedural Relief
The reports also refer to a 2026 update to the Baggage Rules, under which international travellers can import goods valued up to Rs 75,000 without additional duty, provided the items are neither commercial stock nor personal effects. This is presented as a simplification measure that reduces procedural friction for travellers while clarifying the scope of permissible imports.
At the same time, there are continuing technical complexity in areas such as Input Tax Credit and the inverted duty structure. It says sectors offering zero rated services, including medical insurance, face a distinct challenge because although their output is untaxed, they remain unable to claim credit on business inputs such as rent and professional services. This leaves a residual tax cost that cannot be offset.
Technology Led Compliance and a Broader Economic Push
The updated framework is also described as relying heavily on technology integration to improve transparency and curb evasion. The government is using AI driven data systems and mandatory e invoicing to automate return filing, improve data matching and reduce human error.
The changes are framed not only as tax reforms but as part of a wider economic strategy tied to Make in India and the long term goal of Viksit Bharat by 2030. By reducing compliance friction, lowering manufacturing costs and building a more stable tax environment, the reforms are presented as an attempt to improve India’s competitiveness, support exports and create sustainable employment. In that sense, GST 2.0 is being cast as a corrective step that seeks to move the country beyond the initial operational difficulties of the first GST era towards a more streamlined and growth oriented tax structure.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
