Raman Suri
In a landmark move that underscores the visionary leadership of Prime Minister Narendra Modi, the GST Council has rolled out sweeping reforms under what is being hailed as GST 2.0. These changes, effective from September 22, 2025, simplify the tax structure to just two primary slabs – 5% and 18% while introducing zero percent tax on essential items and a 40% rate on select luxury goods. This overhaul is not merely a fiscal adjustment; it is a strategic masterstroke designed to boost domestic consumption, invigorate economic growth, and provide much-needed relief to the common Indian citizen amid global uncertainties.
Under Prime Minister Modi’s stewardship, the BJP commands a strong position in Parliament to drive these transformative policies. With 240 seats in the Lok Sabha alone, as secured in the 2024 general elections, the party, along with its NDA allies, holds a commanding majority to pass legislation swiftly and effectively. This parliamentary strength has enabled the seamless implementation of GST 2.0, reflecting the trust reposed in Modi’s leadership by the Indian electorate.
At the heart of these reforms is a commitment to making life easier for millions of Indians. By rationalizing tax rates, the government aims to reduce the cost of living, stimulate manufacturing, and foster a more inclusive economy. Daily essentials such as hair oil, soap, shampoo, toothbrushes, toothpaste, bicycles, and kitchenware will now attract only 5% GST, down from higher slabs previously. Small cars, which were burdened with a 28% tax, will see a reduction to 18%, making them more affordable for middle-class families.
Even more significantly, a host of items will become entirely tax-free, including life-saving drugs, individual health insurance policies, and several school stationery products. Notebooks, pencils, erasers, maps, and even geometry and colour boxes previously taxed at 12% or higher will now be available at zero percent GST, directly benefiting students and parents across the nation. This reduction from as high as 28% on certain items to zero percent on many everyday necessities exemplifies the BJP-led government’s people-centric approach, ensuring that education and basic needs are not luxuries but rights accessible to all.
These reforms come at a pivotal time when the global trade landscape is fraught with challenges, particularly from the aggressive tariff policies of US President Donald Trump. Trump’s imposition of up to 50% tariffs on Indian exports, ostensibly as retaliation for India’s continued purchase of Russian oil, threatens to disrupt supply chains and impact sectors like textiles, jewelry, and apparel, which could potentially shave off 0.8% of India’s GDP if prolonged.
However, GST 2.0 serves as a robust countermeasure. By slashing taxes on domestic goods, these reforms encourage local consumption and manufacturing, reducing reliance on exports vulnerable to such tariffs. This shift bolsters the ‘Make in India’ initiative, making Indian products more competitive at home and potentially in alternative global markets. As domestic demand surges due to lower prices, it cushions the blow from external shocks, ensuring that India’s economic engine keeps humming without significant disruptions.
Importantly, these changes will not adversely affect India’s GDP; in fact, they are poised to enhance it. The simplified tax structure is expected to improve compliance, widen the tax base, and spur consumer spending, leading to higher economic activity overall. Projections indicate that the focus on affordability for essentials will drive growth in key sectors without inflationary pressures, maintaining fiscal stability. The BJP government, with its proven track record, knows precisely how to navigate such situations-balancing bold reforms with prudent economic management.
I must take a moment to appreciate Finance Minister Nirmala Sitharaman for her instrumental role in architecting these reforms. Her meticulous planning and unwavering dedication have made goods cheaper for Indian consumers, alleviating financial burdens on households and small businesses alike. Sitharaman’s leadership in the GST Council has turned complex taxation into a tool for empowerment, ensuring that the benefits trickle down to the last mile.
As India goes global, these reforms align perfectly with our ambitions. While countering protectionist measures like Trump’s tariffs, the BJP government is fortifying the ‘Make in India’ program, particularly in the defence sector. Investments in indigenous manufacturing of defence equipment not only reduce import dependencies but also position India as a reliable exporter in a multipolar world. This dual strategy of domestic resilience and global outreach is strengthening our economy, creating jobs, and enhancing national security.
In a commendable move by Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, the Union Budget 2025-26 had also introduced several duty reductions and GST reforms that make essential items more affordable, acting as a true Diwali bonanza for poor and middle-class families. Consumer durables and building materials now attract reduced GST easing the financial burden on middle-class households and enabling more festive spending on home improvements and appliances.
On the flip side, the budget wisely increased costs on luxury and non-essential items to curb extravagant spending and encourage responsible consumption, while ensuring the nation’s economic equilibrium remains intact. This strategic approach balances GDP growth-projected at 6.3-6.8% for FY 2025-26-by stimulating demand in essential sectors like agriculture, MSMEs, and manufacturing through lower input costs and tax reliefs up to ?12.75 lakh income slab, fostering employment and domestic production.
Revenue remains safeguarded as simplified GST structures enhance compliance and expand the tax base, with higher collections expected to offset any forgone direct taxes, supported by a robust CAGR of 18% in recent GST inflows and targeted cess on select items. The GST 2.0 is a testament to the BJP’s commitment to ‘Sabka Saath, Sabka Vikas’ kind of development for all. As Prime Minister Narendra Modi aptly said, “Reforms are not just about changing policies; they are about transforming lives.” Under his dynamic guidance, India is not just weathering storms but emerging stronger, ready to lead on the world stage.
(The writer is Executive Member, J&K UT BJP)
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