THE GREAT GST RESET

Touted as the biggest tax reform since the GST implementation in 2017, the latest overhaul will ease consumer spending and make businesses more competitive. But revenue risks cloud the gains

- ANILESH S. MAHAJAN & SONAL KHETARPAL

IT WAS LATE ON THE NIGHT OF SEPTEMBER 3 WHEN FINANCE MINISTER NIRMALA SITHARAMAN, looking both resolute and weary after a gruelling day of GST Council deliberations, walked into National Media Centre in New Delhi for a press briefing. As cameras flashed, she unveiled what the government called “GST 2.0”—a sweeping overhaul of India’s Goods and Services Tax. The four tax slabs of 5, 12, 18 and 28 per cent, she announced, have been folded into a simpler two-tier structure of 5 and 18 per cent, with a special 40 per cent levy on ‘sin and luxury goods’.

The revamp, long demanded by industry and tax professionals, is being seen as a calibrated bet on consumption, coming just days after India posted a 7.8 per cent real GDP growth in Q1FY26—a five-quarter high. Household spending had already begun to revive, and the new tax structure intends to further lower costs for consumers while providing a nudge to sustain that momentum. As it is, this simplification was supposed to be the cornerstone of GST since its very inception, but a four-slab structure led to several classification disputes. been achieved now," says M.S. Mani, partner at Deloitte India.

Posting on social media, Prime Minister Narendra Modi called the rate cuts a “wide-ranging reform”, emphasising how it significantly benefits the common man by reducing tax burdens, boosting affordability and streamlining compliance. The next morning, the market reaction was swift: domestic equities jumped, with Nifty futures up by about 1 per cent, as investors cheered the reform, combined with a projected GDP gain of 0.6-0.7 percentage points over the coming year, cushioning the expected Rs 90,000 crore GST revenue loss.