GST Council 2025 Reforms Explained: Your Complete Guide to GST 2.0

The GST 20 reform in India, effective from 22nd September 2025, aims to simplify tax slabs, reduce costs on essential goods, and increase taxes on luxury and unhealthy items, marking a significant shift in the country's indirect tax system.

Promoted as a "Diwali gift" by Prime Minister Narendra Modi, the reforms are designed to provide relief to households and MSMEs, create predictability for businesses, and contribute to the vision of a developed India (Viksit Bharat)

Everyday goods such as UHT milk, plant-based milk, Indian breads, and medicines will see reduced GST rates, resulting in direct savings for households Similarly, agricultural machinery, bicycles, small cars, and renewable energy equipment will also become cheaper.

Luxury items, including high-end cars, premium motorcycles, sugary drinks, and certain entertainment sectors like betting and casinos, will face higher taxes, reflecting a focus on discouraging luxury and unhealthy consumption

The reforms intend to streamline business operations, particularly benefiting smaller enterprises with faster registration processes, quicker refunds, and reduced compliance delays, which will ease working capital strains

The GST Council clarified that maintaining a 5% concessional rate on medicines, medical devices, and agricultural inputs is essential to allow manufacturers to claim input tax credits (ITC), ensuring affordability and sustainability in these sectors

The revised GST rates will also apply to imports, except where specific exemptions exist, ensuring a consistent tax framework across domestic and imported goods

Home Minister Amit Shah emphasized that the reforms are expected to bring substantial relief to the poor and middle class, while supporting critical sectors such as farming, MSMEs, and youth entrepreneurship

Industry leaders, including the CII and PHDCCI, have praised the reforms as a landmark step that will stimulate demand and enhance inclusivity, highlighting the transformative potential of GST 20 in boosting India's economic growth.

Overall, the GST 20 reform represents a comprehensive reset of India's economic architecture, balancing the needs for growth, revenue, and relief amid global trade challenges.