Alterations to GST, effective from September 22: An explanation of how these adjustments might affect your wallet in a series of straightforward questions and answers
On September 19, 2025, the new Goods and Services Tax (GST) structure, dubbed GST 2.0, was introduced, marking a significant shift in India's taxation landscape. The changes, announced by Union Finance Minister Sitharaman, aim to streamline the tax structure and boost the economy.
Under the new structure, the GST rate has been simplified to a two-rate system: 5% for essential goods and 18% for most goods and services. This simplification is expected to bring clarity and ease of compliance for businesses and consumers alike.
One of the key changes is the 5% GST rate without Input Tax Credit (ITC) that applies to beauty and physical well-being services. Service providers have the option to charge 18% with ITC instead.
In the realm of hospitality, hotels supplying units of accommodation having a value of Rs 7500/- per unit per day or less can avail ITC in relation to such units. Meanwhile, hotels with units above this threshold will continue to pay the 18% GST rate with ITC.
The GST rate on bricks and the applicable tax rate on leasing/renting a car with an operator remain unspecified in the new structure. However, job work services in relation to bricks have a GST rate of 5%, while job work services in relation to bus body building attract a 18% GST rate.
The GST rate applicable on multimodal transport of goods is 5% with restricted ITC, when no leg of transport is by air. When at least one leg of the transport is by air, the rate is 18%, with full ITC. The tax treatment for multimodal transport involving air transport is not specified in the article.
In the digital sphere, an Electronic Commerce Operator (ECO) providing local delivery services is now considered a service provider and is taxed at 18%. This development is expected to impact logistics, requiring efficient infrastructure to keep delivery routes and costs reasonable, especially in rural areas.
The news article does not mention any India-US trade deal talks or tariffs. It also does not provide information about the GST Council or any specific FAQs related to GST 2.0.
Sitharaman claims that the next generation GST reforms will inject Rs 2 lakh crore into the economy. The number of taxpayers has grown from 65 lakh to 1.51 crore under the GST regime. Furthermore, the Finance Minister reported that GST revenues grew to Rs 22.08 lakh crore in 2025 from Rs 7.19 lakh crore in 2018 (FY 2017-18).
One notable exclusion from the GST exemption is input services of insurers. Additionally, ITC cannot be taken on multimodal transport services where no leg of transport is by air and the applicable rate is 5%.
Manufacturers/marketing companies have the option to not recall, re-label, or re-stickering on the label of container or pack of stocks released in the market prior to September 22, 2025, if they can ensure price compliance at the retailer level.
Individual life and health insurance services, such as premium collection and claim settlement, are covered within the ambit of the exemption granted to individual life and health insurance.
The Maximum Retail Price (MRP) of drugs/formulations and medical devices must be revised to reflect the new GST rates. The 5% GST rate without ITC applies to all types of drones.
The new GST structure, with its simplified two-rate system, is a step towards making India's taxation system more transparent and user-friendly. As businesses and consumers adapt to these changes, it is expected that the economy will reap the benefits of this significant reform.
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