GST Reforms 2.0: ‘Diwali Bonanza’ For Common Man Approved By GST Council

On August 15 2025, PM Shri Narendra Modi mentioned in his speech that GST Reforms 2.0 is coming as a ‘Diwali Gift’ for every Indian. These reforms simplify the tax system, reduce your tax burden, and make doing business in India smoother than ever. In the 56th GST Council meeting, held on September 3 2025, the decision to rationalize GST rates was taken unanimously, with all states backing the move.

In this blog, we will break down all the updates regarding GST Reforms 2.0 in simple language and explain how it can impact your business. Let’s get started with an overview first. 

Overview: What’s Changed in GST 2.0 

The Two-Slab Structure

Before now, with every purchase, businesses and consumers were flipping between four different slabs: 

• 5% for basics

• 12% for a handful of goods

• 18% for regular stuff

• 28% for the fancy, or not-so-healthy

Starting September 22, 2025, it’s just two:

• 5% for essential goods

• 18% for most others

What’s New in GST Reforms 2.0?

GST Reforms 2.0, as announced by Prime Minister Modi during his Independence Day speech, has been accepted by the GST Council’s meeting held on September 3, 2025. Here are the major highlights of the same: 

1. Phasing Out 12% and 28% GST Slabs

The announcement of the phase-out of the 12% and 28% GST slabs is one of the most significant in GST Reforms 2.0. Over the years, businesses have found it hard to figure out how to deal with such increased tax brackets. The main objective of the new reforms is to decrease the pressure on businesses and consumers and ease tax systems on businesses.

But the main question is, what does it mean to businesses like yours? So whether you have been paying 12% or 28% GST on your goods and services, you will find your tax rate to go down, and as a result, your costs will go down. 

2. 0% GST on Insurance

Insurance premiums will be taxed at 0% GST, applicable to Health as well as Life insurance. Earlier, it was taxed at 18% This is another major change in the 2025 GST reforms and is meant to make insurance more affordable to the common man, especially in a country like India with low life insurance penetration, evidently far below the global standards.

This is huge for the industry! Imagine, no GST is added to your premiums. That’s a relief, right? And it also allows businesses in the insurance industry to expand without bearing the extra tax burden.

How does it impact your life?

1. Affordable Insurance: Your health cover and your life cover are now cheaper. 

2. Higher Coverage: You can now afford a policy with higher coverage at the same price.

3. Best for Seniors and Families: Senior citizen plans and family floaters, which have long been viewed as more expensive, are now affordable.

3. 40% GST on Sin and Luxury Goods

A new 40% slab GST on luxury and sin goods is also introduced under GST Reforms 2.0. Luxury goods such as sugary drinks, luxury cars, tobacco and other luxury/sin goods will now have higher taxation at this rate. This shift will deter the use of unnecessary and ecologically unfriendly items, as well as bring more income to the state. For the ordinary consumer, it is a step towards a more sustainable economy.

4. GST Registration in 3 Days

Now businesses can be registered in GST in 3 working days only! This move is really encouraging for startups and is a major step towards ‘Ease of Doing Business’ 

In the past, GST registration could be done in a week. With a faster approval process in place now, allowing businesses to commence operations without any unnecessary delays.

5. GST Refund in 7 Days

Under GST Reforms 2.0, the refunds will now take 7 days to complete. Gone are the days of having to wait weeks before receiving a GST refund. This reform will enhance cash flow to businesses, particularly small and medium enterprises (SMEs), who often experience difficulties in accessing liquidity to meet their business commitments.

This move could be a game-changer in the eyes of many businesses since faster access to refunds will contribute to smoother operations.

Conclusion: What’s Next?

GST Reforms 2.0 has brought a number of positive changes to businesses and even consumers. The government is taking big steps to streamline the process of GST through accelerated registration and refund procedures, the elimination of taxation on insurance premiums, and the taxation of essential commodities. 

As a businessman, are you ready to incorporate these changes into your business process? If not, you should start preparing for it.