GST 2.0 Reduces Complexity, But Fuels Fresh Discontent 

Eight years after its launch, the Goods and Services Tax (GST) has finally undergone its most sweeping reform. The new two-slab system promises simplicity where once there was clutter, clarity where confusion reigned. Yet for all its logic, the latest changes reveal a deeper story—one not just of rationalisation, but of political calculation, public pressure, and the uneasy balance between aspiration and affordability. 

The sharpest hikes are on coal (+13%) and online delivery services (+18%, because they were zero-rated before). The sharpest cuts are on insurance (-18%) and many consumer staples/medical goods (-7% to -13%). 

At first glance, the reliefs look generous. Essentials like milk, paneer, and Indian breads such as roti and paratha are now entirely free of tax. A basic grocery basket—soap, toothpaste, shampoo, biscuits, chocolates, noodles—moves to the lower 5 percent slab. Health and life insurance policies, once taxed at a prohibitive 18 percent, are now GST-free. Lifesaving drugs are exempt as well, with most other medicines down to 5 percent. These are changes that touch the everyday lives of Indians, whether in the kitchen or the hospital ward. 

But the natural question lingers: why were these things taxed so heavily to begin with? Why should a roti, the most humble staple, ever have borne a 5 percent levy? Why were health and life insurance—products meant to shield households from financial catastrophe—treated as luxuries, rather than necessities? And why did lifesaving drugs have to be burdened with a 12 percent rate before being granted exemption today? The timing of these rollbacks, couched as benevolent reform, feels less like a generous correction and more like a grudging concession made after lengthy resistance. 

It is difficult to separate these reforms from the broader political context. The BJP-led government has recently faced eroding numbers in the Lok Sabha, and public pressure on issues of affordability has been mounting. One cannot help but read this overhaul as a response to that disquiet, a recalibration to win back trust. Simplifying GST makes headlines, but relieving the tax burden on bread, butter, and medicine speaks to something deeper: survival, dignity, and fairness. 

Not all the moves inspire cynicism. Taxing pan masala, gutkha, and cigarettes at a steep 40 percent is a welcome development, as is raising levies on gambling and online betting. These are indulgences with well-documented social costs. Similarly, pushing luxury cars into the highest bracket is both symbolically and fiscally sound. Few will mourn an extra tax on a German SUV worth tens of lakhs. 

And yet, here too, the lines blur. A mid-sized car with an engine above 1500 CC now bears the same 40 percent GST as a luxury import worth several times more. For millions of middle-class Indians, such vehicles are not extravagance, but aspiration. They are markers of upward mobility, proof of progress after years of saving. To tax them as though they were sins is not just poor economics; it is poor sociology. It risks sending the message that to dream bigger, to seek comfort and mobility, is somehow indulgent. 

This is where GST’s new simplicity begins to reveal its rough edges. By treating vastly different products with the same heavy hand, the system risks perpetuating inequality rather than reducing it. If essentials are rightly eased, why not differentiate more sensitively between tiers of aspiration? Why should the same percentage apply to a weekend in Goa at ₹7,000 a night and a palatial suite priced at ₹70,000? Between an entry-level sedan and a German luxury model? The dream of tax reform was fairness as much as simplicity. The danger of GST 2.0 is that in chasing the latter, it compromises the former. 

There is also the matter of what has grown more expensive. Coal and lignite, once taxed at 5 percent, now face 18 percent. This aligns with environmental goals, perhaps, but it also risks cascading into higher electricity bills at a time when household budgets are already stretched. Online delivery services, once exempt, are now taxed at 18 percent—a sharp increase that could quietly nudge up costs for millions who have grown dependent on digital commerce. These hikes are less visible in political speeches, but they will be felt keenly in homes and wallets. 

The overall effect, then, is a potpourri of relief and rollbacks that is a mixed bag. Groceries and medicines may ease the burden, but power bills, transport, and digital convenience may pinch more sharply. The tax on indulgence is necessary; the tax on aspiration less so. 

In the end, GST 2.0 is both progress and compromise. Simplification is an achievement in itself, and the Council deserves credit for tackling a labyrinthine system that was alienating to businesses and confusing for citizens. But simplification cannot be the only metric. Fairness matters just as much, and it is here that the reforms invite skepticism. 

The message should have been clear: the state taxes what is luxurious, indulgent, or harmful, while easing the path for what sustains, protects, and uplifts. Instead, the signals are mixed—bread and butter free, but ambition still treated with suspicion. India’s tax journey has entered a new chapter, but whether it is one of genuine justice or just political expediency remains an open question.