The Goods and Services Tax (GST) was launched at midnight on 1st July 2017, marking India's most significant indirect tax reform since Independence. According to reports from Zee News, GST was designed as a complex 5-tier structure: 0 percent, 5 percent, 12 percent, 18 percent, and 28 percent. On top of the 28 percent slab, a cascading compensation cess was applied for luxury and demerit goods. The reform subsumed several central and state taxes, creating a common national market and reducing cascading of taxes.
In line with PM Narendra Modi's vision, at the 56th meeting of the GST Council, GST reforms led to revised rates and exemptions. As reported by Zee News, these reforms were hailed as GST 2.0 and came into effect from 22nd September 2025. GST 2.0 mainly focused on streamlining the rate structure, shifting it primarily into two slabs - 5 percent and 18 percent. The 12 percent and 28 percent slabs were eliminated to pave way for the two slabs structure, with most standard goods and services rolled back into the standard 18 percent slab.
The Luxury and Sin Goods Tax was pegged at 40 percent under GST 2.0, according to Zee News reports. This included lottery/online gaming, tobacco, aerated drinks, high-end cars, yachts and private aircrafts. The 40 percent tax rate on luxury and sin goods was introduced to help maintain revenue balance while ensuring a fairer tax structure.
The GST Council has implemented significant rate rationalization measures in June 2026, introducing NIL GST rates for essential food items. According to recent reports, UHT milk (HSN 0402) and pre-packaged bread (HSN 1905) are now exempt from GST, effective from June 2026 onwards. This represents a consumer-friendly move that simplifies tax treatment of essential food items, though businesses must ensure proper HSN classification and maintain thorough documentation for audit purposes. The exemption applies to plain bread, white, brown, whole wheat, and multigrain varieties, while flavoured breads and biscuits remain taxable at 5% or 18% rates.
According to CA Mandar Telang, Joint Secretary, Bombay Chartered Accountant's Society (BCAS) told Zee News, the rollout of GST 2.0 and its slab rationalisation has eased costs for MSMEs and startups by reducing taxes on key inputs and everyday goods. The reform made registration and return filing easier, while speeding up refunds and lowering costs. The procedural ease was aimed to specially benefit MSMEs and startups, with slab rationalisation improving business cash flows and cutting classification disputes. However, recent changes require businesses to carefully manage transitions, ensuring GST compliance frameworks are updated promptly and maintaining thorough documentation for audit purposes.
