India rolls out GST 2.0 with 5% and 18% rates and 40% luxury levy

India implemented a sweeping overhaul of its goods and services tax system on Monday, September 22, as the central government rolled out "GST 2.0," replacing the earlier four‑tier structure with two principal rates of 5 percent and 18 percent and introducing a separate 40 percent levy for ultra‑luxury and certain sin goods. The Union Finance Ministry notified revised Central GST rates in advance; states are expected to issue matching State GST notifications.

The changes, approved at the 56th GST Council and flagged by Prime Minister Narendra Modi as a "GST Bachat Utsav" or savings festival, aim to lower the tax burden on everyday items, simplify compliance and spur consumption during the festive season. Modi and other officials estimated the combined impact of GST and recent income tax reforms could free up as much as Rs 2.5 lakh crore for households.

Under the new schedule, mass‑use consumer goods such as soaps, shampoos, toothpaste, packaged snacks, dairy products, bicycles and kitchenware have been moved largely to the 5 percent slab. Many items previously in the 28 percent bracket, including air conditioners, televisions, refrigerators and select automobiles, now attract 18...