GST 2.0: Simplifying India’s tax framework

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India’s GST framework is entering a new phase of transformation. The 56th GST Council meeting has delivered one of the most sweeping tax overhauls since 2017 — a reset that goes beyond rates to touch profitability, liquidity, and reputation. These reforms are designed to simplify structures, rationalise rates, and support both businesses and consumers, marking a pivotal step in India’s journey towards Atmanirbhar Bharat.

Key highlights from the 56th GST Council Meeting

GST 2.0 introduced

Transition from a four-slab structure to a simplified two-slab system — 5% for essentials and 18% for standard items — with a 40% slab for luxury and sin goods (effective 22 September 2025).

Consumer relief measures

Essential food items and FMCG products moved to the 5% slab; small cars, motorcycles, ACs, and electronics shifted to the 18% slab.

Strengthening healthcare

36 life-saving drugs exempted from GST; life and health insurance policies brought under GST exemption.

Facilitating ease of doing business

GST registration process to be completed in just three working days.

Faster dispute resolution

Goods and Services Tax Appellate Tribunal (GSTAT) to start operations by September 2025.

Enhanced business liquidity

Risk-based provisional refunds for zero-rated exports and inverted duty structure (IDS) cases.

Greater compliance clarity

Alignment of post-sale discounts with credit notes and removal of taxability disputes for intermediary services.

Transformative impact on businesses and consumers

These reforms mark a landmark shift in India’s tax landscape. With rationalised rates, improved affordability, and streamlined compliance, GST 2.0 is expected to:

Stimulate consumption and ease inflationary pressures.
Boost domestic manufacturing, supply chains, and MSME growth.
Unlock working capital for exporters and high-impact sectors such as textiles, pharma, and renewable energy.
Provide certainty through faster dispute resolution and simplified compliance.

From reform to readiness: Grant Thornton Bharat’s rapid support framework

Managing the GST reset requires more than tax adjustments — it demands coordinated action across finance, operations, and compliance. Our rapid support framework enables management to respond with clarity, discipline, and preparedness through:

Transition planning

Managing inventory, ITC, and procurement flows.

Commercial and contract review

Identifying areas for renegotiation and client/vendor communication.

Compliance preparedness

Strengthening records, processes, and audit-readiness.

Impact assessment

Evaluating rate changes, exemptions, margins, and cash flows.

The consensus on GST rate rationalisation—adopting a streamlined two-rate structure of 5% and 18%, with a 40% special rate for sin goods within the first day of the Council meeting marks a landmark moment in India's indirect tax evolution. It reflects the true spirit of GST2.0, envisioned to enhance ease of living and make essential consumption more affordable across sectors like FMCG, retail, automobiles, pharma, textiles, and agriculture.

Krishan Arora Partner, Tax Planning & Optimisation and India Investment Advisory Leader, Grant Thornton Bharat

Lower prices, higher affordability and rising disposable incomes are expected to drive rural markets, strengthening India’s consumption-led growth story. In urban areas, consumer savings from GST cuts are likely to push demand for premium FMCG products. In recent weeks, demand had softened as consumers waited for clarity on GST rationalisation. So, retailers are expecting a strong sales rebound during the festival season.

Naveen Malpani Partner and Consumer Industry Leader, Grant Thornton Bharat

The rate rationalisation is a pivotal shift for India’s energy sector. By reducing GST on renewable energy devices and components, the government has lowered project costs, enhancing the financial viability of solar, wind, battery storage and green hydrogen solutions.

Manoj Mishra Partner and Tax Controversy Management Leader, Grant Thornton Bharat

The rate cut on GST for small cars could significantly lower acquisition costs by up to INR 1 lakh (accounting for a 12 per cent drop in process), which is expected to revive demand, especially in Tier 2 and Tier 3 cities, with the festive season approaching.

Saket Mehra Partner and Auto & EV Industry Leader, Grant Thornton Bharat

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Webinar recording

56th GST Council meeting: Decoding the Fine Print & Impact on Industry

We hosted a webinar on the '56th GST Council meeting: Decoding the fine print & impact on industry', marking a shift to GST 2.0—a simpler, more predictable, growth-focused tax system. Experts discussed macro reforms and sectoral implications for pharma & healthcare, FMCG, automobiles, real estate, and technology, alongside transitional challenges in pricing, contracts, and supply chains.

56th GST Council Meeting: Healthcare sector

The industry will benefit from reduced pricing with the lowering of applicable GST rates, and patients will experience affordable access to critical drugs.

Watch

Podcast: Navigating the GST overhaul

In #GTBharat’s PolicyCast, our leader, Krishan Arora decodes the Council’s reforms from a policy lens. Watch the full discussion for actionable takeaways.

Watch now