GST 2.0 Reforms 2025: Big Tax Cuts Coming for Households, Students, Farmers, and Businesses

The Council of GST (Goods and Services) is soon anticipated to introduce some significant amendments in GST laws under GST 2.0, which can result in a reduction of households, students, farmers, and businesses’ costs. Ultimately, reduce inflation in the country.

The changes recommended under GST 2.0, which are likely to be discussed in the GST council meeting scheduled to be held on September 3-4, 2025, in New Delhi, aim to expand the list of items with zero tax, reduce the 12% tax rate, and lower taxes on some goods currently taxed at 18%.

More Tax-Free Items Under GST 2.0

By these GST changes, the council is expecting to amend the zero tax slabs, introducing various distinct types of significant products under nil GST. The council is likely to shift GST slabs of 5% and 18% to zero for products like UHT milk, pre-packaged paneer (chena), pizza bread, khakhra, chapati, and roti. Parathas, which were earlier taxed at 18%, are also anticipated to be included in the suggested zero-rate list, as per the Group of Ministers on Rate Rationalisation.

Items related to education are also likely to benefit from this proposal. Items such as Maps, pencil sharpeners, pencils (including crayons, pastels, tailor’s chalk, and drawing charcoals), atlases, globes, printed charts, exercise books, graph books, and laboratory notebooks are also likely to shift to the Zero slab from 12%. If the council allows the proposed amendments, households and students will enjoy a major relief, as changes would simplify GST rules and improve transparency.

Many Daily Use Essential Goods to Get Cheaper

GST 2.0 changes may reduce GST on several common-use goods, including butter, condensed milk, jams, mushrooms, dates, nuts, and namkeens, from 12% to 5%. Bakeries, sweet shops, and packaged food manufacturers will benefit from these changes.

Presently, Chocolates with cocoa, cereal flakes, pastries, ice cream, etc., are taxed at an 18% GST rate; this rate is proposed to be reduced to 5%. All these GST amendments are aimed towards making the indirect tax system more uniform and stable. Also, to reduce inflation on often-used goods.

GST Cut on Textiles and Fertilisers

GST cuts can be seen on textile industry products like woven fabrics of cotton, man-made fibres, wool, apparel, hosiery, and blended textiles. Rates are proposed to be reduced to 5%.

Changes will also affect the agricultural sector. GST rates on key fertilisers such as urea, diammonium phosphate (DAP), muriate of potash (MOP), single super phosphate (SSP), and complex fertilisers may shift to 5% from the present 12%. This will ultimately reduce their purchasing price, hence reducing the cultivation cost for farmers.