Narendra Modi Government's new GST reforms, which are referred to as "GST 2.0 Utsav" or "Festival of Savings," were implemented on Monday, September 22. The reforms are meant to give the middle class considerable relief by lessening the burden of taxes on many commodities and services. The erstwhile four-slab GST system of 5%, 12%, 18%, and 28% has been reduced to a mere two slabs: 5% and 18%. Furthermore, a new GST rate of 40% will be levied on luxury and harmful goods, and the cess on these products has been entirely phased out. This has brought about a net tax cut for most luxury items and cars.

This cut in GST rates will also go a long way in giving the sales in the forthcoming festival season, such as Dussehra and Diwali, a big push. Sectors such as automobiles and electronics, which have been hurting due to weak sales and high inventory, are most upbeat. The car companies are providing bundled advantage of the new GST rates along with festive offers to woo consumers. Luxury car prices have also been brought down with the abolition of the cess.

Finance Minister Nirmala Sitharaman has asked businesses to make sure the total gain from the GST cut reaches the consumers. The central government has instructed all companies and organizations to show both the old and new prices on their products for three months. This must include a clear marking of the lowered GST amount. Numerous firms have already released press statements notifying the new rates, and the government has also established a toll-free number to enable consumers to file any non-compliance complaints.

Key Changes and Their Impact

The new GST 2.0 changes will introduce major price shifts across multiple sectors, favouring Telugu-speaking state consumers as well as consumers all over the country. Firms are now mandated to place new price labels on products produced, packed, or exported prior to September 22, with the old and new MRPs both being visible. This implies that a product can have two price labels—one showing the previous GST and the other showing the new one. Firms have until March 31, 2026, to exhaust their remaining packaging material. Let us understand the major sectors and items that will undergo a price cut:

Insurance: GST on health and life insurance premiums has been removed entirely. Earlier, an 18% GST was charged on these policies. This cut can benefit policyholders by ₹7,000 to ₹8,000 per policy, causing huge relief to middle-class families.

Family Essentials: An estimated family can save ₹400 to ₹600 every month on household needs and groceries. More than 400 items, such as dry fruits, packaged drinking water, and food items, are expected to become cheaper. Top brands like Amul have already slashed prices on more than 700 products. For instance, the cost of butter (100g) is expected to decline from ₹62 to ₹58 and ghee (1 liter) will have a ₹40 decrease, now at ₹610.

Electronics: GST on TVs has been slashed from 28% to 18%. This should reduce prices of TVs by ₹2,500 to ₹85,000, depending upon size. Other electronic items such as air conditioners (ACs), dishwashers, refrigerators, and washing machines will also be cheaper, with prices falling by up to ₹4,500 and ₹8,000, respectively.

Personal Care Products: Everyday personal care products such as hair oil, shampoo, face cream, and soap will also become cheaper. For example, a 340ml pack of Dove shampoo will now be ₹435 rather than ₹490, and a four-piece pack of Lifebuoy soaps will go from ₹68 to ₹60.

Automobiles: The car and other vehicle GST has been cut considerably. Though the earlier tax, with cess, was 35% to 50%, a flat 40% rate has been introduced with the cess taken off. This reduces the highest tax on vehicles. Small cars will now be charged an 18% GST. It is a lifesaver for the auto industry, and top players like Maruti and Tata have already declared price reductions. For instance, a Maruti Suzuki Alto K10 may now be ₹1,07,600 less expensive, and a Tata Tiago may become cheaper by as much as ₹75,000.

Construction: The GST on cement has been lowered from 28% to 18%, which will drive down housing and construction costs.

Healthcare: Medical equipment such as diagnostic kits and glucometers will now be charged a GST of 5%, making them cheaper.

Services: GST on beauty and fitness services like barbers, salons, fitness centers, and yoga centers has been reduced as well.

GST 2.0 - A Boost for the Economy

The "GST 2.0 Utsav" is more than a marketing label; it is a big economic policy change intended to galvanize consumer spending and support the economy. The earlier GST regime with high rates and convoluted slabs tended to induce consumer aversion, particularly for large-ticket purchases. By lowering rates and streamlining the tax code, the government believes that it will place more disposable income into the pockets of the middle class and get them to spend.

This is a straight response to the economic woes of recent times, such as tepid sales in important industries. The GST cut will act as a fuel for a consumption-driven recovery, particularly in the all-important festive period. The abolition of the cess on luxury items and vehicles is a brave initiative that can make these products affordable to a larger consumer pool, thus increasing sales and helping companies sell through the build-up stock.

The call by the Narendra Modi-led NDA government for businesses to openly post the new prices and share the benefits with consumers is a step of paramount importance in establishing trust and making sure that the reforms attain their desired purpose. By making prices more accessible and open, the government is not only assisting the middle class but also developing a dynamic and competitive market.