Section 1: 22 September, Across India
In Ramakanth Samosa Wala, Mint St, Sowcarpet, it’s time to pull down the shutters. Like all good owners, Kaka Ji peeps into his sales register. He has done this for the last many years, and intuitively knows the profits. But tonight he pauses for a moment. His nephew asks, “Uncle, will we increase the prices tomorrow?” Kaka Ji is quiet for a while. And then he says, “Tomorrow, we’ll start afresh.”
Hundreds of kilometres away, Meher Irani, the chief financial officer of a consumer goods company located in Mint Road, heaves a sigh of relief. Her team has spent the last few days reprogramming, shifting products into new tax brackets, and now they are good to go. The grammar of GST is being rewritten nationally, and she wanted to be sure her company knew the syntax in its toto.
Far from both Chennai and Mumbai, in a home in Bodh Gaya, Bihar, a schoolteacher’s wife spreads the month’s expense bills across the dining table. On television a news ticker runs about “GST changes effective 22 September.” She is clueless about taxation, but knows her household budget like the back of her hand. When the husband returned that night she asked him: “will things get cheaper, or more expensive?”
These are three Indians, joined by a single tie, the Goods and Services Tax. A reform that was born with a lot of fanfare in 2017 is undergoing angioplasty now.
For eight years, GST promised “one nation, one tax.” For eight years, it gave technical glitches, compliance nightmares and unending disputes. On 22 September, the rates will be reset, and compliance rules tightened. The government calls it simplification.
I had voted for GST when it was launched. I call it breathing a new life because I saw it as a brave attempt to fix a broken tax system. The intent was right, but with time it was clear that the execution was wrong. So, let’s be honest. What we are seeing now is not exactly GST 2.0 but a long-awaited fixing of mistakes. This piece is not a cheerleader’s whistle but a pragmatic look at the inside. If 2017 was the big-bang inauguration, 2025 is a course correction. We must therefore see with an accountant’s eye and a citizen’s heart.
Section 2: GST’s Long Road To Here
At the stroke of midnight, on 30 June 2017, the Goods and Services Tax (GST) came into being. It was celebrated as the most ambitious indirect tax reform in independent India. The central hall of the parliament, that had 70 years earlier heard Pandit Nehru’s stirring tryst-with-destiny speech, echoed the promise of one nation, one tax.
The ambition was himalayan. By subsuming several tax levies such as excise duty, service tax, VAT, octroi, etc., GST promised three things: a common market, an end to cascading taxes and making business simple. However, the journey was hardly smooth. There were road bumps. States wanted compensation guarantees, industries sought exemptions, and parliament fought over slabs. What finally emerged was five slabs – 0 per cent, 5 per cent 12 per cent, 18 per cent and 28 per cent – with additional cesses. Mark it 0 per cent is also a rate and is different from exempt supplies!
Soon catastrophe struck. Within months, the GST Network (GSTN) portal, meant to be the backbone of compliance, cracked. It gave way under the rush of tax filings like an overbridge built by a recalcitrant contractor. Deadlines were repeatedly extended. Small traders queued at Suvidha Kendras, trying to make sense of a digital tax system. We held on, saying this is the price we have to pay to cleanse the system. Gradually, things stabilised. In 2019, a nationwide rollout of the e-way bill spelled the end for border check posts. It smoothened the movement of goods, and speeded travel between states. Then came covid 19. Collections collapsed as more than 9-billion people locked themselves in their homes while an invisible virus played rogue.
In 2022, the five-year compensation window for states expired and cracks became visible on India’s federal structure. States accused the centre of going back on its promise of compensations. In 2023, the supreme court in the Mohit Minerals case ruled that the GST council’s decisions were not binding on the states. That same year, online gaming, horse racing, and casinos were brought into the GST net at a flat 28 percent. The reform fire was spreading into new territories!
All said, GST did change India’s tax landscape. Monthly collections, once under Rs1 lakh crore, now routinely cross Rs1.6 lakh crore. More units came under the formal economy, but the promise of simplicity remained unfulfilled. Multiple slabs was a key cause for friction. That is why 22 September 2025, matters. The changes being rolled out mark an attempt to bring GST closer to what was originally intended. Namely, reducing categories and giving assesses another chance at relief. But it should not be forgotten that many of these were suggested years ago. For instance, in 2015, the Arvind Subramanian committee had warned against too many slabs.
Postponement added to distrust
At the 56th meeting of the GST council held on 2nd and 3rd September 2025, the government bit the bullet. Nirmala Sitharaman announced reorganising the rates into three slabs: 5 per cent, 18 per cent and 40 per cent. Television anchors jumped in joy. Trade bodies welcomed the move. Economists predicted a possible drop in inflation. Opposition leaders hinted at a Rs 1 lakh crore revenue loss. It was, in the words of the Sunday Guardian “the boldest reset since GST’s midnight launch in 2017.”
The story of GST is thus both ambitious and unfinished. It shows India’s ability to attempt a reform of humungous scale and road blocks on the way.
Section 3: What Exactly Changes on 22 September?
Come September, along with rates and compliance yes, the clumsy grammar is becoming simpler. This is how it would look.
Rate change
At a Chennai supermarket, Meena, makes her monthly purchases. She notices soaps, detergents, and shampoos now attract 5 per cent tax. Last month they were 18 per cent. She smiles. The bigger surprise comes later when her agent calls: “Ma’am, your health policy renewal will be cheaper by 8 per cent. Insurance premium is now tax-free.” Wow. What a relief!
The relief goes further. Education stationery is now tax-free, a gain for parents like Meena who have school-going children. The humble roti and khakhra move to the 0 per cent bracket.
If essentials are cheaper, “de-merit” goods are costlier. Users of tobacco products, cigarettes and aerated colas will now pay at 40 per cent. The government says this aligns with public health goals. For the cola-loving teenager, the pinch on his pocket money is real!
Online gaming makes it to the 18 per cent slab. While the old punishing 28 per cent slab is gone, the 18 per cent still bites. Owners hope that a less hostile rate will encourage more players.
Compliance Gets Simpler
It isn’t just rates; the very process of filing GST is going to become easier. Ravi who runs a small logistics outfit in Madurai, has dreaded e-invoicing since it was introduced. His auditor explains: “From 22 September, you don’t need to match every credit note with every invoice.” The thresholds for e-invoicing are more practical. For Ravi, that means less time over spreadsheets and more time dispatching goods. Across India, many small operators will rejoice.
The changes don’t stop there. Exporters will get refunds faster. Small businesses can now register in days. Routine return filing gets easier, with pre-filled forms. Finally, for companies caught in legal disputes, a GST Tribunal finally kicks in. Together these tweaks lighter the compliance fatigue that has haunted GST.
Section 4: Sweet Spots
GST was meant to simplify the tax language. The upcoming changes push the system closer to what it should be. That’s good.
Simplification
Essential goods from milk powder to detergents have been revised downward. Luxury items are moved up. One can argue about the exact brackets, and the right rate percentages, but the principle is sound. A family buying groceries will save a little more, while those purchasing designer watches will pay extra. That is how progressive taxation should work. This simplification also has psychological value. The fewer the slabs, the easier it is for the common users to understand.
Revenue buoyancy
These changes will push tax collections up. When taxes look reasonable, the citizen wants to pay. Also online gaming is now properly taxed. It means more inflows for the exchequer. For a government married to both welfare economics and infrastructure commitments, buoyant revenues without stifling growth are like manna from heaven.
Fairer distribution
By lowering taxes on essentials and increasing them on others, the system shifts towards fairness. This is common sense. True the rich and the middle class continue to pay the same rate over the same goods, but the products that the latter normally buy are now taxed less than what the former buy. Another way to say the same is that basic food items belong in every household and deserve relief. Online gaming or luxury goods that belong largely to the rich, by contrast, can and do have a higher rate.
Digital compliance
E-invoicing, mandatory input tax credit reconciliation and tightened reporting have curbed leakage. Fake invoicing, once an industry by itself, has become risky. The 22 September rules strengthen this by lowering thresholds for e-invoicing. More businesses will now have to turn digital. For the honest taxpayer, this has a silver lining: cleaner invoices mean smoother credit flow. The small businessman who once lost sleep over mismatched returns can now trust that the system will work.
Take Tirupur, Tamil Nadu’s knitwear capital. For years, exporters there struggled with Input Tax Credit (ITC) mismatches. “We would ship goods worth Rs 1 crore,” says one exporter, “but our refund would get stuck because some supplier had not filed correctly.” With tighter e-invoicing and automated reconciliation, those troubles are easing. Refunds will arrive faster and exporters can focus on markets rather than paperwork.
Measured optimism
Lets make one thing clear: The road to GST 1.0 was messy and the years after were messier. Now, simplification, fairness, and cleaner compliance are coming in. For businesses that spent eight years adapting to the chaotic situation, these changes bring relief. For the government, it means possible buoyant revenues. For consumers, it means soap that costs cheaper, and luxury watches a little higher. Somewhere along the line everyone breathes easier.
Section 5: Sour Notes
If the good deserves recognition, the bad too must be talked about. 22 September will not erase the deeper problems of GST. Remember, what should have been done in 2017 is being done in 2025. Now that is not reform. That is catch-up. It is not that we are being wise in hindsight. This was beaten into the government time and again, but they turned both a deaf ear and a blind eye.
Compliance pain remains
The talk of simplification papers the reality that compliance continues to be heavy. E-invoicing thresholds have been lowered. It for sure plugs leakage but what about the cost of software that smaller firms have now got to incur. For a trader in Kannur who issues 50 invoices a day, digital integration is both boring and painful. As the wag said, “GST replaced the tax inspector with a server that crashes often.”
Grey zones
Then there are ambiguities. Clarifications come late through circulars or court judgments. Until such time businesses keep second-guessing how their product will be classified. In a sector like insurance, even a two-percent rate ambiguity can translate into crores of additional liability. The September changes leave many such questions open. Perhaps an exhaustive list for the lower rate and a higher rate for the rest would best meet the needs of simplicity.
Reform fatigue
The biggest “bad” in the long list of bads is reform fatigue. Every few months, a new notification, a new clarification, or a new compliance requirement lands on the table. Businesses cannot plan long-term when the tax system is constantly shifting. When the rules change too often, confidence erodes. Alas, GST has been a reform forever in reform!
The unfinished agenda
India still has multiple slabs. Exemptions remain arbitrary. The dream of a truly seamless single-rate GST is still far-far away. What we have now is an improvement, not arrival. Yes, it continues to be work in progress, but thank god we have at least moved.
Section 6: Winners, Losers, and the Middle Seats.
2025 throws out a set of winners and losers. Let’s cut to the chase. Take the household sink. Soap and detergents, the mandatory items in every monthly budget, got cheaper. You may ask, what’s a few rupees saved on washing powder, but the psychological impact still weighs. For once, the reform reaches the bathrooms!
For years, life and health premiums carried an 18 per cent tax. That Rs 25,000 health policy cost another Rs 4,500 simply in GST. That goes. The middle class, often punished for fiscal prudence, is now surprisingly being rewarded.
Exporters too are smiling. In hubs like Tirupur or Kanpur, working capital used to be locked up for months in Input Tax Credit refunds. The new system promises to release it in weeks. In businesses where liquidity is lifeblood, speed is the new subsidy. The exchequer has reason to be happy. Lower thresholds for e-invoicing and tighter ITC rules plug the leaks in the system. It means steadier revenue flow and who doesn’t love that. Exercise books, pencils, crayons, maps are items that make up a student’s daily world. These are now exempt from GST. Given the high cost of education, these drops may not seem much, but they do signal the government’s attention to the education economy. That itself is a good sign. Also ask a parent how small additions to the wallet matter, and they will tell you a story.
Reform never spreads its gifts evenly. Online gaming and digital start-ups face a hit. With GST rates on them raised sharply, they need to reinvent themselves.
Small manufacturers may feel hit. From Rajkot to Rajakoil a trader logs into the portal and finds himself face to face with new e-invoicing thresholds, tighter ITC checks, and several compliance requirements. The government calls it simplification. To the small player, it is still paperwork.
GST 2.0 creates its share of winners and losers. On balance, the tilt is positive. For every homemaker smiling at a cheaper bar of soap, there is a small entrepreneur uncomfortable at a fresh list of forms to fill. But you see, you cannot make everyone happy.
Section 7: What True GST 2.0 Would Mean
We have a long way to go before we can we call it the finished product. What would a real GST 2.0 look like? GST resembles a menu card—five slabs, plus special rates, plus exemptions. It’s trimmed down to three. The next step would be to collapse them into two. Essentials in one, others in another. The clarity will benefit everyone. There will be no more television debates about whether a samosa is a ‘snack’ or a ‘meal.’ The Vitt Manti aka finance minister can sleep in peace. A true GST 2.0 must involve transparent and predictable revenue-sharing, each party trusting that the other will keep their part of the bargain. That will mean the real federal structure that our founding father conceived of. Without this understanding, the common market will remain fragile.
Businesses crave for stability more than lower taxes. Since 2017, rate changes and compliance tweaks have kept entrepreneurs busy. In a true second phase, ‘predictability’ must become the powerful mantra. This means unchanged regulation for five years. When rules are stable, investor confidence rises.
India need not reinvent the wheel. We only have to look to the map for inspiration. Singapore has a single GST rate. Australia moved to a uniform GST. The EU allows multiple bands but within a narrow, predictable range. Yes, India’s economy is more complex, but the foundational principles still apply: fewer bands, cleaner rules, stronger trust.
If GST is a highway, for travellers to move smoothly, the clutter must clear and the traffic signal must work. Of course, everyone must obey the signal and for that the traffic cop should be present. Not as someone who sees everyone with a doubtful eye, but as a referee who ensures that game is played with equity and fairness. For this we have a long distance to travel.
In Sowcarpet, Ramesh Sharma shuts his shop for the night. “Margins are thin,” he mutters to his nephew, “but at least clear.” In Mumbai, Meher Irani’s laptop is loaded with green ticks. Every product has found its new bracket. She is contended. In corporate finance, predictability is in itself a victory. In Bodh Gaya, the dining table bills add up. Soap and detergent cost less, some items cost more, but the balance holds. In middle-class households, that’s progress.
On 22nd September, India doesn’t finish the GST journey. It merely changes into the next gear. The grand promise of one nation, one tax’ is still far away. Because in India, even reform comes in instalments.
As Robert Frost said and Pandit Nehru echoed, “The woods are lovely, dark and deep; but I have promises to keep; And miles to go before I sleep; And miles to go before I sleep.”
GST 2.0: A Mixed Bag
India’s GST Council’s decision to create a new 40 per cent bracket is textbook progressive taxation. Good economics and politically saleable. Likewise, the GST Appellate Tribunal finally coming in is welcome news. Businesses see disputes resolved within a time frame. However, raising job work rates to 18 per cent defies logic. Construction services finally get a single rate. Health and life insurance get exempted — true relief for households. Favourable clarifications on post sale discounts and credit notes are anti litigative. However, the biggest challenge is to effect changes in the info-tech systems within the timelines in the absence of formal notifications. ~CA Vijay Anand, Specilist in Indirect Taxes
GST 2.0 is a carefully calibrated reform. Essential goods that directly affect the common man have been exempted or placed in the 5 per cent slab. The move was long overdue. A two-slab structure reduces classification disputes. In effect, GST 2.0 is a ground-level gamble aimed at spurring consumption. The key challenge lies in services, which remain at 18 per cent. This risks creating an accumulation of input tax credit. ~Vaitheeswaran Krishnamurthi Lawyer with 35 years Experience in Advisory and Tax Litigation
GST 2.0 is a blockbuster exercise. The 18 per cent slab for automobiles will trigger a multiplier effect. The reduction in GST will boost car sales. This would trigger demand for spares and parts, ultimately leading to increased job opportunities. .
The reduction in cement GST would drive the real estate and infrastructure sectors. Pushing medicine to lower slabs would help the common man. ~Murali Krishna, Senior GST Officer
Spending seems to be the mantra for this year. The Income Tax threshold exemption increased earlier in the year has put expendable surplus in the hands of individuals, and now the GST rate reduction has given the avenue to spend such surplus. This is a positive step. ~CA. Shankara Narayanan V Expert in Indirect Taxes
