Key Points:
- GST 2.0 India – Life & health insurance now GST-free.
- Tax Cuts – Essentials 0–5%, autos & durables 18%.
- Luxury Hike – Sin goods up to 40%.
NEW DELHI (AP)—India rolled out a sweeping update to its Goods and Services Tax system Monday, introducing exemptions and rate cuts across sectors ranging from health insurance to consumer products. Prime Minister Narendra Modi described GST 2.0 India as a next-generation overhaul aimed at boosting affordability and supporting the government’s vision of a self-reliant India.
The new system, effective September 22, introduces changes to tax treatment on life and health insurance, local delivery services, transportation, and everyday items such as shampoos and face powders. Officials said the goal was to simplify compliance while reducing burdens on households.
Key Exemptions and Adjustments
Under GST 2.0, all individual life insurance policies—including term plans, endowment policies, and unit-linked insurance plans—are fully exempt under GST 2.0 India. Reinsurance of these policies also falls under the exemption. Similarly, individual health insurance policies, family health coverage, and plans designed for senior citizens will no longer carry a GST charge.
Transportation remains a mixed model. Passenger travel by road continues at 5 percent without input tax credit (ITC), though operators may opt for an 18 percent rate with ITC. Economy class air travel remains taxed at 5 percent, while premium and business classes continue at 18 percent.
For last-mile logistics, the liability framework has shifted. If delivery services are offered by an unregistered provider through an e-commerce platform, the platform itself must collect and pay GST. Registered providers, however, will pay the tax directly. Local delivery services now fall under an 18 percent rate.
Consumer Goods, Medicines, and Imports
The Finance Ministry announced cuts in consumer product categories, including reductions on shampoos and face powders, framing the move as part of a simplification effort rather than a benefit to large manufacturers.
Medicines remain taxed at 5 percent rather than being fully exempt. Authorities explained that a zero rate would block manufacturers from claiming credits on raw materials and packaging, likely raising production costs and consumer prices.
Other changes include taxation of leasing or renting goods at the same rate applied to the goods themselves. For instance, leasing a car without a driver will carry the same 18 percent GST levied on car sales.
Imports are also covered under the revised framework, with the Integrated GST (IGST) applied at new rates beginning immediately unless exemptions have been specified.
One distinction was made between dairy and plant-based beverages. Ultra High Temperature (UHT) processed milk from dairy sources is fully exempt, while almond, soy, and other plant-based milk products are now uniformly taxed at 5 percent.
Here’s a table summarizing the new GST rate cuts effective from September 22, 2025:
| Items/Product Category | Original GST Rate | Revised GST Rate |
| Essentials & Daily Use Items | 12% / 18% | 0% or 5% |
| Personal Care & Household | 12% / 18% | 5% |
| Healthcare & Medical Supplies | 12% | 0% or 5% |
| Consumer Durables & Automobiles | 28% | 18% |
| Construction & Industrial | 28% + cess | 18% |
| Apparel (Above Rs 2500) | 12% | 18% |
| Luxury & Sin Goods | 28% / varied | 40% |
| Insurance (Health & Life) | 18% | Exempt (0%) |
Broader Economic Goals
Officials positioned GST 2.0 India as both a simplification and a stimulus. The Finance Ministry emphasized that the reforms are intended to make the system fairer for consumers while ensuring producers are not disadvantaged by input tax credit restrictions.
Modi, in a 19-minute televised address, called the changes the beginning of “GST Utsav,” or a celebration of tax reform. He said the measures demonstrate India’s commitment to efficiency and affordability while building a stronger domestic economy.
The rollout of GST 2.0 India marks the second major restructuring of the GST framework since its 2017 launch, underscoring the government’s ongoing effort to balance revenue needs with consumer relief.
