GST 2.0: A defining moment for India's growth story

Against this backdrop, the GST 2.0 reforms announced by the GST Council on 3 September stand out as one of the most significant milestones since the tax’s rollout in 2017. These reforms are more than a fiscal adjustment—they signal a new era of trust and collaboration between the central government, the states, and the business community. In doing so, they set the stage for India’s ambitious goal of becoming a $30 trillion economy by 2047.

The rationalization of rate slabs, the shift of essential items into the 5% bracket, and the exemption of individual life and health insurance from GST are both timely and strategic. By easing the burden on mass-consumption goods, these measures are poised to stimulate demand and boost household purchasing power just as Indians head into the festival season.

This sets the foundation for a broader, consumption-led growth cycle by lowering input costs and translating them into more affordable consumer prices—an important cushion amid ongoing global uncertainties.

From cars to cement: GST cuts with broad impact

The reforms are also tailored to the aspirations of the common man, most evident in the rationalization of rates on high-value consumer goods.

The automobile sector, for example, has received a significant boost. By reducing GST on small cars, three-wheelers, and motorcycles with engine capacity up to 350cc from 28% to 18%, the government has directly addressed the needs of first-time buyers and middle-income families.

Similarly, appliances such as air conditioners, televisions, and dishwashers will now attract 18% GST instead of 28%, making them more accessible to a wider section of consumers and encouraging upgrades.

The impact extends to housing and homeownership. The reduction of GST on cement from 28% to 18% will cut construction costs, while similar adjustments on other building materials will lower the overall cost of housing. This is expected to benefit both developers and homebuyers, while giving a strong push to the real estate sector.

Beyond immediate relief, the reforms tackle structural bottlenecks. Correcting inverted duty structures demonstrates the government’s intent to resolve long-standing inefficiencies. Streamlined refund processes and faster registration protocols are expected to ease compliance and working capital pressures, particularly for MSMEs that are central to India’s growth story.

For exporters, timely refunds will improve liquidity, reduce capital costs, and strengthen competitiveness at a time when global tariff concerns are rising.

Another noteworthy aspect of GST 2.0 is the Council’s pragmatic approach to anti-profiteering. In India’s competitive markets, tax reductions naturally flow to consumers. By avoiding cumbersome oversight, the reforms ensure benefits are passed on efficiently, allowing businesses to focus on growth rather than compliance.

The next phase belongs to Indian industry

The onus now shifts to Indian industry to seize this momentum. Companies must be proactive in preparing for the 22 September implementation—reassessing rate changes on their products, inputs, and overall input tax credit positions, while updating ERP systems.

They will also need to evaluate how state-linked incentives and subsidies interact with the new rates, which may require renegotiation in some cases. At the same time, this transition presents an opportunity to strengthen automation in compliance processes, recalibrate supply chains, refine pricing strategies, and scale operations in anticipation of stronger domestic demand.

Ultimately, the GST 2.0 package represents a decisive step toward a simpler, more efficient indirect tax regime in line with a dynamic economy. It is a defining statement of trust and collaboration that will leave a lasting legacy—empowering consumption, laying the foundation for manufacturing and employment growth, and paving the way for a more prosperous and sustainable future.

Just as importantly, it reflects the balance and clarity required to shape India’s tax landscape for the decades ahead.

Saurabh Agarwal is a tax partner at EY India. Vikram Chawla, senior tax professional at EY India, contributed to this article.