GST 2.0 Kicks In: TVs, ACs, Cars Get Cheaper as India Begins ‘Savings Festival’
A major overhaul of India’s indirect tax system, GST 2.0, came into effect on Monday, ushering in a “GST Bachat Utsav” (Savings Festival) that promises to make a wide range of goods from daily essentials to cars and electronics cheaper just as the Navratri festive season begins . The new regime consolidates the previous multi-slab structure into two primary rates, a move aimed at boosting consumption and simplifying tax compliance for businesses across the nation .
Under the reformed system, the previous four GST slabs have been merged into a 5% rate for essential goods and an 18% rate for most other goods and services. A separate 40% “sin tax” bracket has been created for luxury items and demerit goods such as tobacco, alcohol, and online gaming . This rationalization means that many household products previously taxed at 12% are expected to move down to the 5% slab, while big-ticket items like air conditioners, refrigerators, and TVs, which were in the 28% bracket, could now be taxed at 18%, potentially reducing their prices by 7-8% .
In an address to the nation on Sunday, Prime Minister Narendra Modi hailed the reform, stating that the combined benefit of the GST cuts and earlier income tax reductions would lead to savings of Rs 2.5 lakh crore for the public . He framed the rollout as a new chapter for an ‘Atmanirbhar Bharat,’ emphasizing that the simpler tax structure would replace the complex pre-2017 web of taxes like octroi, VAT, and service tax, which slowed down business and increased costs .
The reform is expected to provide a significant boost to the economy. Economists estimate that the new structure could add up to 0.8 percentage points to India’s GDP growth by stimulating demand. The stock market has already reacted positively, with auto and consumer goods stocks seeing sharp gains .
For consumers, the impact will be felt in cheaper daily shopping baskets, with items like toothpaste, soaps, and packaged foods costing less, as well as significant savings on larger purchases. However, not everything will be cheaper, as petroleum products remain outside the GST framework and luxury goods like diamonds are expected to retain higher tax rates .
