Why the Second Wave of GST Reform Matters
The Goods and Services Tax (GST), launched in 2017, was hailed as a historic step towards unifying India’s complex indirect tax system. Over time, however, multiple rate slabs and classification disputes created confusion for businesses and consumers alike. Fast forward to 2025, the government has unveiled what Prime Minister Narendra Modi earlier described as the “next generation” of GST reforms—streamlined, simplified, and citizen-friendly. With Finance Minister Nirmala Sitharaman at the helm, the GST Council has approved a rationalized two-slab structure effective September 22, promising affordability, transparency, and ease of doing business.
The reform, often referred to as “GST 2.0,” is not just a numerical exercise in tax restructuring; it is being positioned as a people-centric move aimed at reducing household expenditure while supporting small enterprises and labour-intensive industries. At the heart of this transformation lies one simple question every consumer is asking: how will it change my food bill?
The Big Shift: From Four Slabs to Two
For years, GST rates were divided across four major slabs—5, 12, 18, and 28 percent—creating overlaps and disputes, particularly in food-related items where even popcorn and buns triggered prolonged debates. With GST 2.0, the landscape is far more straightforward.
· 5% slab: Most essential and processed food items.
· 18% slab: A broad category covering non-essential but widely consumed goods.
· 40% slab: Reserved for sin goods, luxury items, and carbonated drinks.
By removing the 12% and 28% slabs, the government has eliminated a great deal of complexity, promising stability and predictability. Sitharaman highlighted that the reform goes beyond rates, correcting inverted duty structures and classification issues that plagued the system for years.
Everyday Kitchen Relief: From Milk to Pickles
The most immediate impact will be felt in Indian kitchens. Essentials such as bread, fresh milk, and paneer have been made completely tax-free, lightening the load on household budgets. Ultra-high temperature milk, earlier taxed at 5%, is now exempt, while ghee, butter, paneer, and cheese slide down from 12% to 5% or even nil.
Starches, pasta, cornflakes, biscuits, and cocoa-based products have all been standardized at 5%, down from previous rates of 12–18%. For households, this means groceries that once crept up in bills will now offer tangible savings.
Pickled vegetables, jams, sauces, broths, and even mayonnaise—all of which earlier carried higher levies—will now be taxed at just 5%. Similarly, dry fruits including almonds, pistachios, cashews, and dates will also be cheaper, moving from 12% to 5%. For a country where festive sweets and dry fruits are integral to celebrations, the timing couldn’t be more fitting.
Popcorn, Snacks, and the Great Dining Out Relief
Few food items symbolized GST confusion more than popcorn, where salted and caramel varieties were taxed differently. GST 2.0 simplifies this: salted popcorn, whether loose or pre-packaged, now attracts just 5%, while caramelized versions remain at 18%. Cream buns, previously subject to tax ambiguities, now fall under the 5% slab as well.
Ready-to-eat snacks such as namkeens, bhujia, and pre-packaged savory mixes will also see a reduction to 5% from the earlier 18%. For millions of Indian families who turn to these items as quick bites, this translates into notable monthly savings. Even more striking is the benefit to dining out. Restaurant bills will now carry a reduced GST of just 5%, significantly cheaper than before
Winners and Losers: Who Gains, Who Pays More
While most food and essential goods are becoming cheaper, certain categories face heavier taxation. Aerated drinks, energy beverages, and other carbonated products have been shifted to the steep 40% bracket, up from 28%. This sends a clear signal: indulgence and luxury will come at a higher price, while basics and nutritional essentials are made more accessible.
From an industry standpoint, labour-intensive sectors like food processing, hospitality, and agriculture are expected to gain from reduced rates and clearer tax classifications. On the flip side, beverage companies and luxury goods manufacturers may see demand soften under the new regime.
A Reform with Wider Purpose
Beyond the numbers, GST 2.0 aims to restore public trust in a tax system often criticized as confusing and inconsistent. The reforms align with broader national goals—ease of living for citizens, ease of business for entrepreneurs, and predictability for investors. By addressing classification disputes and ensuring rationalization, the government has taken a step toward making GST more citizen-friendly and less adversarial.
Prime Minister Modi hailed the move as transformative, noting that it would “improve lives of our citizens and ensure ease of doing business, especially for small traders and enterprises.” The symbolic launch date—September 22, coinciding with Navratri and ahead of Diwali—underscores the government’s intent to link economic relief with cultural significance.
Towards Affordable Meals and Simplified Taxes
GST 2.0 may not be a panacea for all challenges in India’s indirect tax regime, but it represents a significant stride forward. For consumers, it brings immediate relief at the grocery store, in the kitchen, and at restaurants. For businesses, it reduces compliance headaches and ensures greater clarity in operations.
The reform also underscores a shift in philosophy: taxation should not burden daily living but should encourage affordability, nutrition, and fair competition. While some sectors, particularly luxury and aerated beverages, will absorb higher costs, the larger population will enjoy lower expenses on essentials and processed foods.
As India readies itself for a festive season with cheaper snacks, sweets, and family outings, GST 2.0 sets a new precedent—where fiscal reform meets household relief. If implemented effectively, it could very well become the tax reform that truly touches every citizen’s plate.
(With agency inputs)
