New GST 2.0 Regime Introduced in India with Relief

India’s GST system just took a big leap. In the 56th GST Council meeting (3 September 2025), the government approved sweeping reforms to make GST simpler, fairer and more relief-oriented for consumers, businesses and small taxpayers. These changes are being rolled out from 22 September 2025 (with some exceptions) and mark the start of what many are calling GST 2.0.

In this updated guide, we’ll cover: what the new regime is, old vs new slab comparisons, key benefits, implementation tips & what aspirants must remember (especially for UPSC / PCS amd HPAS exams).

What’s New in the GST Regime (From 22 September 2025)

Here are the recent changes:

The old four-slab structure (5%, 12%, 18%, 28%) is replaced by a two-tier rate structure: Merit rate = 5% and Standard rate = 18%.
A De-merit rate of 40% is introduced for select goods & services such as luxury and sin goods (tobacco, pan masala, high end luxury vehicles, etc.)
Some items (especially essentials, life & health insurance, etc.) have been exempted or moved to Nil rate.
The changes are effective from 22 Sept 2025 for goods & services, except certain tobacco/pan masala products which will follow later due to compensation cess obligations.

Old vs New GST Slabs — Comparison Table

Here is how the rate slabs change (some typical items for context):

Former Slab(s)	Items / Examples (Old)	New Slab / Changes	Notes
5%	Basic everyday items, some food, hygiene products	Many items stay in 5%; more goods moved into 5% (e.g. toiletries, shampoo, butter, ghee etc.)	5% becomes the “Merit rate” for many goods & small items.
12%	Many processed food, intermediate goods, non-luxury items	Most 12% items are being moved down to 5% or up to 18% depending on category / value / luxury nature.
18%	General goods & services, electronics, etc.	Standard rate remains 18% for many; some items earlier in 28% or 12% moved into 18%.
28%	Luxury goods, high-end electronics, etc.	Most 28% slab removed except for de-merit / sin goods, which are taxed at 40% or remain under old/slightly adjusted structure.

Key Benefits of the New Rationalised GST Regime

Consumer Relief / Lower Prices
Many daily use items (toothpaste, shampoo, dairy products etc.) will become cheaper as they move into the lower slab. Exemptions (nil rate) for essentials reduce cost of living.
Simplified Tax Structure
Two main slabs (5% & 18%) + one special demerit slab reduces complexity. Fewer categories → easier compliance, less confusion.
Boost for Businesses & MSMEs
Reduced rates on inputs and many goods reduce input cost, improve cash flows. Simplified HSN / SAC code alignment and reduced rate inversion helps working capital.
Government Policy Alignment
The de-merit rate reflects public health / sin goods policy. More goods moved to merit slab supports affordability and consumption, helping with GDP growth.
Trade / Exports / Services Benefit
Rules modified for intermediary services (place of supply changes) may make export of certain services more favourable. Simplified refunds and reduced inversion issues will help exporters/service providers.

Challenges / Things to Watch Out For

Implementation & System Updates: Businesses need to update pricing, billing, ERP systems, e-commerce listings from Sept-22.
Tobacco & Pan Masala Products: Still under old rates / compensation cess until obligations are cleared.
Effect on Revenue for States: Some states may face short-term drop in GST revenue; compensation mechanism/adjustments will matter.
Anti-Profiteering & Price Monitoring: CBIC has asked to track prices for many items to ensure rate cut benefit is passed to consumers.

UPSC / PCS – Key Points to Remember (For Exam Prep)

Know that from 22 September 2025, the new rate structure (5%, 18%, de-merit 40%) becomes effective for most goods/services.
Understand which items moved where — especially essentials (food, hygiene), health/Life insurance, vehicles, cosmetics.
Be able to compare old structure (4 tiers: 5/12/18/28) with new simplified one.
Know the exemptions / nil-rated items and which sin / luxury goods still have high / de-merit rate.
Understand policy rationales: easing burden on common man, controlling sin goods, correcting rate inversion, boosting consumption.

Final Thoughts

The GST 2.0 reforms mark a significant shift in India’s indirect tax architecture. By rationalising slabs and focusing on common goods, the government is aiming for relief for consumers, simplification for businesses, and policy coherence.

For aspirants, this is not just about knowing percentages: the changes reflect current governance priorities, fiscal policy direction, and how India balances growth + welfare + revenue generation. Keep an eye on official notifications & items lists, because specific goods/services classification matters in answers.