Key changes from the Next-Gen GST Reforms (GST 2.0)
1. Rationalized GST rates
- Simplified slabs: The tax structure was simplified from multiple slabs to primarily two: 5% (for essentials) and 18% (for most other goods and services). The old 12% and 28% slabs have been largely abolished.
- New 40% rate: A special 40% rate was introduced for "sin" and ultra-luxury goods, including high-end cars, yachts, certain carbonated beverages, and tobacco products. The existing 28% rate on tobacco will remain until compensation cess obligations are met.
- Tax exemption for insurance: Individual life and health insurance premiums are now exempt from GST, a move intended to increase insurance penetration in India.
2. Impact on specific goods and services
- Cheaper goods: Many household goods and consumer durables saw rate reductions.
- From 28% to 18%: Air conditioners, refrigerators, televisions, small cars, two-wheelers up to 350cc, commercial vehicles, and cement.
- From 12%/18% to 5%: Packaged food items (e.g., namkeens, biscuits, pasta), personal care products (e.g., hair oil, soap), medicines, and agricultural machinery.
- From 12% to 0% (Exempt): Maps, charts, notebooks, pencils, and pre-packaged dairy products like paneer.
- Lower service taxes:
- Hotel stays: The rate for hotels with tariffs between ₹1,001 and ₹7,500 was reduced from 12% to 5%.
- Wellness services: Services like gyms, salons, and yoga centers were moved from the 18% slab to 5%.
3. Enhanced compliance and process changes
- Hard-locking GSTR-3B: Starting from the August 2025 tax period (filed in September), GSTR-3B liability values auto-populated from GSTR-1 are now hard-locked, meaning they cannot be manually edited downwards.
- Faster refunds: A revised, system-based process for granting provisional refunds for zero-rated and inverted duty structure supplies was implemented from November 1, 2025.
- Appellate Tribunal operational: The Goods and Services Tax Appellate Tribunal (GSTAT) began its operations, with deadlines set for filing appeals electronically.
- Simplified post-sale discounts: A new circular dated October 1, 2025, simplifies the process for suppliers to issue credit notes for post-sale discounts, provided the recipient reverses the proportionate Input Tax Credit.
- Three-year filing limit: A strict three-year time limit for filing all GST returns from their original due date was enforced starting from the Octo
