Authors: Dr. Balaji N P
Abstract: The 2025 “GST 2.0” reforms represent the most significant overhaul of India’s Goods and Services Tax regime since its introduction in 2017. The reform simplifies the earlier multi-slab structure (0%, 5%, 12%, 18%, 28% + cess) into essentially two principal slabs of 5% and 18%, with a 40% demerit rate for select sin and luxury goods, while maintaining a few special rates such as 0% and 3% for specific items. This paper examines the anticipated and early observed impact of GST 2.0 on growth, inflation, sectoral performance, household welfare, fiscal stability, and federal relations. Using secondary data from government factsheets, think-tank reports, and early academic assessments, the study finds that GST 2.0 is likely to reduce tax incidence for most households, stimulate consumption in key sectors such as FMCG, automobiles, housing, healthcare and insurance, while imposing higher burdens on sin and luxury goods.However, the reform also raises concerns over medium-term fiscal risks for the Centre and states, inverted duty structures in specific niches, and the need for robust anti-profiteering and dispute-resolution mechanisms. The paper concludes that the net impact of GST 2.0 is growth-positive and welfare-enhancing, but its long-term success will depend on careful calibration of rates, timely refunds, and cooperative federalism.
DOI: http://doi.org/10.5281/zenodo.17699242
