The GST 2.0 updates span across sectors:
- Essentials and FMCG: Dairy, medicines, and household goods have dropped to lower rates (5% or nil).
- Consumer durables and automobiles: Small cars, two-wheelers, and items like ACs/TVs now fall under 18%, while luxury cars, SUVs, and yachts are taxed at 40%.
- Pharma and healthcare: Around 36 life-saving drugs are exempt, with key devices and consumables at 5%.
- Construction inputs: Cement cut from 28% to 18%; marble and granite blocks reduced to 5%.
- Renewables and energy: Solar devices were restored to 5%, and coal increased to 18%.
- Hospitality and wellness: Hotel rooms ≤ INR 7,500/day and services such as gyms and salons now at 5%
- Services: Individual health and life insurance policies are exempt; transport and job-work services are rationalised.
Alongside rate changes, the GST Council has also announced compliance measures:
- Risk-based provisional refunds (from November 2025).
- Simplified GST registration (three-day approval for low-risk cases for small businesses with ≤ INR 2.5 lakh monthly output tax).
- The GSTAT (Appellate Tribunal) will be operational by year-end, and pending filings will be made before 30 June 2026.
- Legislative changes on post-sale discounts and intermediary services.
These shifts place the finance function at the centre of the transition, directly affecting how organisations plan costs, manage liquidity, and stay compliant.
Opportunities
While much of the conversation has focused on rates, the bigger story for CFOs lies in the opportunities these reforms open up. The changes have the potential to ease cost pressures, improve liquidity, and create greater certainty in historically contentious areas. For finance leaders, these shifts could provide room to strengthen balance sheets and capture new demand.
- Cost competitiveness: Lower GST on essentials, durables, construction materials, and pharma could improve affordability, boost demand, and ease cost pressures across supply chains. CFOs can capture the upside in consumer-facing sectors or cost-sensitive industries.
- Liquidity relief: Risk-based refunds and correction of inverted duty structures enhance working capital efficiency, particularly for exporters and manufacturing CFOs.
- Healthcare and insurance: Exemptions on life/health insurance and medicines lower employee benefit costs and widen access — CFOs can rethink benefits design and cost allocations.
- Dispute resolution certainty: The GSTAT finally being operational will speed up appeals, reducing the uncertainty around disputed tax positions.
- Pricing and margin strategy: With anti-profiteering oversight lifted, pricing flexibility increases. CFOs must ensure ethical pricing while optimising margins.
These reforms are a long-awaited step toward simplification. From an indirect tax standpoint, rationalisation should reduce classification disputes and litigation. However, CFOs should not assume immediate gains across the board — actual benefits will depend on how sector-specific notifications and refund mechanisms are rolled out in practice.
Another advantage lies in investor perception. A simplified GST regime signals policy stability, which CFOs can leverage in capital-raising conversations, particularly with global investors who value predictable tax frameworks.
Challenges
The flip side is that reforms of this scale rarely come without friction. CFOs must manage risks while actively guiding their organisations through the transition through rate shifts, compliance changes, and uneven sectoral impacts. The challenge is not only in adapting systems but also in navigating pricing pressures and stakeholder expectations.
- Margin compression: Products shifting up (e.g., from 12% to 18%) may force CFOs to choose between passing costs to consumers or absorbing them, especially in competitive markets.
- Systems and contracts: ERP/tax engines, invoicing, and vendor/customer contracts must be reconfigured to reflect new rates and compliance changes.
- Cash flow and tax planning: Reclassifying goods/services may affect the input tax credit (ITC) positions. CFOs should reassess working capital and tax provisioning strategies.
- Sector unevenness: High-end auto, luxury goods, beverages, and “sin” categories face steep tax increases — CFOs here must manage demand elasticity and reassess revenue forecasts.
- Transition management: Treatment of transitional credits, post-sale discounts, and ongoing contracts during the shift may create complexity and require close coordination between tax, legal, and finance teams.
The transition will not be frictionless. CFOs should expect teething issues in ERP reconfiguration, disputes around ongoing contracts, and refund processing. The phased rollout of the GSTAT is welcome, but resolution timelines will still depend on execution at the ground level. Active coordination with tax teams and early scenario planning will be critical.
For CFOs, the GST 2.0 shift goes beyond compliance. It demands fresh thinking on the pricing, working capital, and operational readiness.
Action points for leadership
- Initiate impact assessment across product lines and services.
- Engage tax advisors to interpret rate changes and compliance requirements.
- Update internal controls and SOPs to reflect new GST dynamics.
- Ensure IT systems readiness, contract reviews, and transition credits.
- Monitor government notifications for final implementation timelines.
The short-term focus will be on systems readiness, contract reviews, and transition credits. In the longer term, CFOs can leverage opportunities in liquidity management, affordability-driven demand, and dispute resolution certainty.
This article first appeared in the Fortune India on 17th September 2025.
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