GST 2.0 Reforms: What It Means for You and Your Wallet
Since its launch in 2017, the Goods and Services Tax (GST) has successfully simplified taxes and created a unified national market. However, the system’s multiple tax rates have remained a major point of contention. Prime Minister Narendra Modi’s recent announcement of a new two-slab GST system—one for everyday essentials and one for standard goods—promises to change how households spend.
This change isn’t just about abstract tax policy; it’s about the bills you pay every month. Here’s a breakdown of how these reforms could affect your finances.
Your Everyday Shopping Basket
The biggest impact will be on your grocery bill. Currently, items like ghee, butter, and packaged foods are taxed at 12%. Moving them to a 5% GST slab could reduce prices by ₹40-50 per kg of ghee. For a family spending ₹10,000 on groceries each month, this could mean savings of ₹400-600, offering meaningful relief against rising food inflation.
Making Big Purchases More Affordable
- Home Appliances: Products like air conditioners, large televisions, and dishwashers are currently considered luxuries and taxed at 28%. A reduction to 18% could save you thousands. For instance, a ₹50,000 AC could be ₹5,000 cheaper, and a ₹25,000 television could cost ₹2,500 less. These savings are crucial for young families setting up their homes.
- Cars: The automobile sector is also set for a major change. A small car with a ₹10 lakh ex-showroom price currently has a total tax burden of around ₹3.5 lakh. The proposed 18% GST slab could drop this to just ₹2 lakh, saving you over ₹1.5 lakh. This could unlock demand and energize the entire industry.
Lowering the Cost of Healthcare
With life insurance covering only 3.2% of the GDP and health insurance covering less than 40% of the population, the current 18% GST on insurance premiums adds a significant cost. If premiums are exempted from GST, a family paying ₹50,000 annually for health coverage could save nearly ₹7,000-8,000. This rationalization is not just a fiscal move; it’s a social one that could make health insurance more accessible to millions.
The “Sin Tax” and Its Purpose
The reforms also propose a 40% “sin rate” for demerit goods like tobacco, aerated drinks, and online gaming. Unlike other categories where tax relief translates to lower prices, this higher levy is a deterrent. Companies in these sectors will likely pass this cost directly to consumers, making these indulgences a much more expensive affair.
Ultimately, these reforms aim to create a fairer and simpler system. By making essentials more affordable and aspirations more achievable, GST 2.0 could positively impact lives in powerful and subtle ways, bringing a new sense of confidence and simplicity to India’s tax system.