The Ambassador of India to Kuwait, Dr. Adarsh Swaika

India is set to implement a significant overhaul of its Goods and Services Tax (GST) system, effective September 22, 2025, coinciding with the start of the auspicious festival season. This comes soon after Prime Minister Narendra Modi had announced from the ramparts of the Red Fort in his Independence Day Speech on 15 August 2025 about his intention to unveil the next Generation Reforms in GST soon. These GST reforms are anchored on three core pillars: structural reforms, rate rationalization, and procedural simplification.

Under the new system, the GST structure will be streamlined into two primary slabs: 5%, and 18%, with addition of a new slab of 40% rate solely for luxury and sin goods such as high-end vehicles, tobacco products, and aerated drinks. The previous 4-tier GST system, which included higher 12% and 28% slabs, will be abolished.

The Goods and Services Tax (GST) was, initially, introduced in India on       1 July 2017- hailed as India's most significant indirect tax reform since Independence. It subsumed various central and state taxes providing a unified taxation system in India.

The current reform, labeled as GST 2.0, reaffirms India’s commitment to building further simpler, fairer and growth-oriented GST framework, which will ensure ease of living for the common man, improve ease of doing business and stimulate economic growth.

Strategic Leadership

India’s GST 2.0 rationalization under Hon’ble Prime Minister             Narendra Modi is being seen as a bold step in tax reforms, reinforcing the country’s intent to attract investments and sustain growth. This simplification was intended to eliminate complexities that had plagued the system since its inception, such as inverted duty structures and classification disputes. More than a domestic adjustment, GST 2.0 signals to global markets that India is serious about creating a predictable investor-friendly tax environment.

The Hat-trick of India’s Economic triumph

GST 2.0 comes in at the heels of major income tax and monetary policy measures, implemented as part of broader vision to provide a strong boost to India’s economic growth. To begin with, rationalized tax slabs announced in the 2025 Union Budget allowed for more disposable household income. The Reserve Bank of India (RBI) reduced repo rate to 5.5% from 6%, thus making loans cheaper with lower EMIs on homes and vehicles, while expanding credit availability for businesses. Now, GST 2.0 completes this three-pronged strategy of the Indian Government, which analysts are referring to as India’s economic “hat-trick.

Consumer Relief and Demand Stimulation

At its core, GST 2.0 seeks to ensure that the benefits of reduced GST rates are passed on to consumers promptly and boost consumption by making everyday essentials more affordable. The recent GST reforms have made healthcare and social security more accessible by exempting GST on life and health insurance, including family and senior citizen policies, and on reinsurance, while reducing taxes on medicines and medical equipment—33 lifesaving drugs now attract zero GST, and most other healthcare essentials just 5%. Food items such as cottage cheese, packaged snacks, and essential items such as soaps, hygiene products, and smaller vehicles now fall under lower rates, directly easing household budgets. The reforms also addressed agricultural needs by slashing GST on tractors, farming machinery, and fertilizer inputs like sulphuric acid and ammonia from 18% to 5%. Further, GST on education services and learning supplies has been eliminated, reinforcing the government’s focus on accessible education.

Sectoral Impact and Market Response

The reform is already generating optimism across markets. In the Automobiles sector, effective price drops across popular models such as SUVs and sedans are expected to spur demand. For MSMEs, simplified compliance, faster refunds, and reduced tax anomalies will free up resources for growth. The manufacturing sector is expected to see improved export competitiveness with rate adjustments and simplified processes that will benefit the textile, renewable energy, and auto parts sectors by resolving inverted duty structures (IDS). Reduced costs in the Real Estate and Construction sectors are expected to encourage both investment and consumer spending. Meanwhile, the Banking and Financial Services sector could benefit from increased lending and insurance activity, driven by lower EMIs and stronger credit demand. Stock markets have already responded favorably, signaling investor confidence in the reform’s sustained economic impact.

Trusted Global Supplier

India’s recent GST reforms are not just transforming its domestic economy—they are unlocking new opportunities for global trade partners, including Kuwait. Streamlining of taxes leads to lower transaction costs and minimize delays in supply chains, making Indian goods and services more competitive in global markets. For Kuwait, which has substantial imports from India ranging from food products, textiles, Made in India vehicles, gems and jewellery,  and engineering goods etc, the reforms strengthen India’s role as a reliable trade partner, and enable Kuwait to access Indian products more efficiently and at competitive rates.

Growth Impact and Global Competitiveness

India continues to hold its position as the world’s fastest-growing major economy, with Q1 of FY 2025-26 recording an estimated growth rate of 7.8%. The introduction of GST 2.0 arrives at a crucial moment, as rising global tensions and unilateral trade measures threaten to undermine international trade competitiveness. With India’s growth largely driven by domestic consumption, these next-generation GST reforms are going to provide a significant stimulus to economy. By simplifying slabs and aligning with global tax practices, India enhances its competitiveness in global value chains, while also boosting its ease of doing business rankings.

Long-Term Significance: Viksit Bharat 2047

GST 2.0 is not just a tax reform; it is a growth engine that positions India as an attractive destination for global capital. By rationalizing taxes, simplifying compliance, and stimulating demand, it demonstrates a governance model focused on immediate impact and sustained prosperity. With GDP forecasts of 6.4 to 6.5% for FY 2025/26 from the IMF and RBI, GST 2.0 could push growth higher, supporting India’s ambition of becoming a Viksit Bharat by 2047. India is already the 4th largest economy in the world and on track to become 3rd largest economy in the next couple of years. Overall, GST 2.0 is a transformative reset of India’s tax landscape, set to create a future-ready business environment in India, one that strengthens consumer confidence, revives business sentiment, and tells the world that India means business.