In 2025 India pushed a two-track tax modernisation: a major GST rationalisation (“GST 2.0”) to simplify slabs and deliver targeted reliefs, and a phased modernisation of income-tax law and administration to reduce disputes and ease compliance. Together the moves aim to cut compliance costs, support household consumption and modernise tax administration — while protecting the revenue base.
What changed under GST 2.0 — the essentials
- Two core GST slabs: 5% (essentials) and 18% (standard) to simplify classification and pricing.
- New 40% top slab for a narrow list of luxury/sin goods to protect revenue.
- Targeted reliefs: selected staples, some medicines and specified health/insurance services moved down or eased.
- Effective from late Sept 2025 with transition rules for ITC and invoicing.
Income-tax modernisation — what to know
- New framework, phased rollout: A reworked Income-Tax Act has been proposed and is being phased in to simplify provisions, remove obsolete sections and make the statute easier to interpret.
- Administrative overhaul: Emphasis on digital-first, faceless assessments, clearer notice rules and faster refunds. Practical measures (updated ITR utilities and revised filing windows) are already being applied to smooth the transition.
Practical impact — who gains, who watches
- Winners: Consumers (lower tax on many packaged foods and staples), mass-market retailers and MSMEs that benefit from simpler classification; individuals buying health/insurance services that received relief.
- Watchers / affected: Producers and sellers of goods moved into the 40% bracket (tobacco/pan masala/high-end luxury items) face higher tax bills.
Conclusion
GST 2.0 and income-tax modernisation together represent a structural shift: simplification for everyday taxpayers and businesses, targeted taxation for luxury/sin items to protect revenues, and a stronger digital, rule-based administration to cut friction. The policy mix aims to boost consumption and reduce compliance costs, but the transition requires active management — especially pricing updates, ITC reconciliation and close tracking of procedural circulars.
FAQs
1. Will overall prices fall?
Ans: Not uniformly. Many everyday items will see lower GST and could become cheaper, but items moved into the 40% slab will be costlier. Final shelf prices depend on whether sellers absorb the tax change or pass it on.
2. Are the GST changes permanent?
Ans: They are statutory/notification-based policy changes. The GST Council can revisit slabs if fiscal needs change.
3. When will the new income-tax rules fully apply?
Ans: The income-tax modernisation is phased; some administrative measures are already live, while substantive legislative changes are scheduled in stages and will take formal effect on the notified dates.
4. Will states lose revenue because of GST cuts?
Ans: State finances were part of the Council deliberations; compensation and transfer mechanics are intended to manage transitional pressures, but monitoring continues.
5. What should a business with old ITC balances do first?
Ans: Reconcile ITC immediately, document the basis for utilisation or reversal, and consult tax counsel to avoid cash-flow surprises.
My self Anita Sahani. I have completed my B.Com from Purbanchal College Silapathar. I am working in Dev Library as a Content Manager. A website that provides all SCERT, NCERT 3 to 12, and BA, B.com, B.Sc, and Computer Science with Post Graduate Notes & Suggestions, Novel, eBooks, Health, Finance, Biography, Quotes, Study Materials, and more.
