New Delhi – Prime Minister Narendra Modi’s government has announced sweeping reforms in the Goods and Services Tax (GST) regime, now branded as “GST 2.0”. Effective from September 22, the new system reduces the number of tax slabs from three to just two – 5% and 18%. The government has labeled it a “Savings Festival”, claiming consumers will collectively save ₹1.5 lakh crore annually. It is being projected as a strong push toward the Atmanirbhar Bharat (Self-Reliant India) campaign.
However, the Congress party has slammed the move as a “growth-suppressing tax”, arguing that small traders will face even bigger compliance burdens. Public response remains divided – the middle class is welcoming the move, while small shopkeepers and traders across India express anger. Social media is abuzz with hashtags like #GSTScam and #TaxTrap, reflecting the growing rift between citizens and the government.
Government’s Claim: “Savings Festival” for Consumers
At a special event in Delhi’s Vigyan Bhawan, PM Modi said:
“GST 2.0 not only simplifies the tax system but also puts more money into every Indian family’s pocket. Earlier slabs (0%, 5%, 12%, 18%, 28%) created confusion. Now, 5% applies to essentials like grains and medicines, while 18% covers everything else. This will check inflation and boost the economy.”
Finance Minister Nirmala Sitharaman presented data, claiming:
- GDP growth will rise by 0.5%.
- 10 crore middle-class families will save an average of ₹12,000 annually.
The government stressed that these reforms were unanimously approved at the 50th GST Council meeting (September 15) and that mandatory digital invoicing will make compliance easier. Since its 2017 launch, GST revenue has surged from ₹7 lakh crore to ₹20 lakh crore annually, but small traders have repeatedly complained about compliance complexities like monthly returns and ITC claims. The government says GST 2.0 will also accelerate export refunds, further strengthening Atmanirbhar Bharat.
Opposition’s Counter: “Growth-Suppressing Tax”, Trader Backlash
The Congress party dismissed the reforms as an “election gimmick.” Senior leader Pawan Khera said:
“This is not reform but a growth-suppressing tax. Compliance burdens remain the same. Small shopkeepers must still file multiple returns. Even essentials are grouped into the 18% slab with luxury goods. It’s a lollipop for the middle class but a death blow to traders.”
Rahul Gandhi posted on X: “Modi ji’s GST 2.0: relief for the rich, burden for small traders. #GSTScam”.
Opposition leaders argue that small businesses are already grappling with cash flow crises and delayed ITC refunds. They claim 1.5 million small businesses shut down in FY 2024–25, and GST 2.0 will worsen the crisis. Other opposition parties echoed the concern. Samajwadi Party’s Akhilesh Yadav said: “UP’s traders are already crushed under inflation. Now this is a new burden.” Opposition parties have demanded a parliamentary debate.
Public Reaction: Relief vs Resentment
Street surveys in Delhi’s Sarojini Market and Mumbai’s Crawford Market highlight two distinct perspectives.
Middle class optimism
Neeta Singh, a 35-year-old IT professional, said: “Mobiles and clothes now attract only 18%. Earlier, slabs varied between 12% and 28%, which was confusing. I’ll save ₹5,000–₹6,000 a year. Good step.”
Trader anger
Rajesh Kumar, who runs a 20-year-old shop in Chandni Chowk, said: “Slabs reduced, but software and filing costs remain the same. We small traders are drowning in debt. At 18%, margins shrink and customers will leave.”
In Mumbai’s Dadar Market, the Confederation of All India Traders (CAIT) led a protest march with over 500 shopkeepers. CAIT President B.C. Bhartia declared: “The government ignored all 10 of our demands. Without easing compliance, reforms are meaningless.”
A NITI Aayog-supported survey found 60% of traders call GST 2.0 a ‘new burden’, while 40% of consumers see it as a ‘relief’.
Economic Impact: Boost or Crisis?
Experts remain divided.
- Critical views: Economist Arun Kumar wrote in The Hindu: “Reduced slabs may cost the exchequer ₹50,000 crore in revenue, worsening the deficit. With 70% of GST revenue from small businesses, their discontent could paralyze the economy.”
- Balanced views: Former RBI Governor Raghuram Rajan tweeted: “Simplification is welcome, but digital divides must be addressed. Rural traders need training.”
- Positive outlook: A FICCI report suggests exports may grow 10% due to faster refunds, but warns of a 20% job loss in MSME sectors.
Celebration or Trap?
GST 2.0 exposes a growing trust gap between the government and citizens. While the government sells it as a festival of savings, many traders call it a new tax trap. Opposition parties are pushing for rollback and wider consultation. With protests intensifying and parliament gearing up for heated debate, the big question remains: Is GST 2.0 truly a relief – or just another political illusion?
FAQs
Q1: What is GST 2.0?
A1: GST 2.0 is the overhauled Goods and Services Tax regime introduced in India from September 22, 2025. It simplifies the system by cutting the number of tax slabs to just two – 5% on essential items such as food grains, medicines, and education services, and 18% on all other goods and services. The aim is to reduce confusion, make compliance easier, and create a uniform tax structure across the country.
Q2: Who benefits the most from GST 2.0?
A2: Middle-class families are the primary beneficiaries. They will save on frequently purchased items such as clothes, electronics, and household goods that earlier attracted 12%–28% GST. The uniform 18% slab also reduces ambiguity, helping salaried families manage budgets better. Large corporations benefit from streamlined compliance, while exporters gain from faster refunds. However, low-income households benefit less since essentials were already taxed at minimal or zero rates earlier.
Q3: Why are traders opposing GST 2.0?
A3: Small traders argue that while slabs have been reduced, compliance requirements remain complex. Filing multiple returns, maintaining digital invoices, and bearing the cost of GST software add financial pressure. Since most consumer goods are now at 18%, traders say their profit margins shrink, especially when competing with e-commerce giants. They also fear customers may cut spending as prices in some categories rise slightly, creating a demand slowdown.
Q4: How will GST 2.0 impact the economy?
A4: Economists offer mixed forecasts. On the positive side, simplification is expected to boost consumption, improve tax compliance, and encourage foreign investment. Faster refunds for exporters may increase India’s global competitiveness. On the negative side, reduced tax collections may widen the fiscal deficit, and MSMEs (Micro, Small and Medium Enterprises) could suffer job losses due to compliance stress. The real impact will depend on how efficiently the government balances these challenges.
Q5: Is GST 2.0 permanent?
A5: GST 2.0 has been formally rolled out by the government, but its permanence depends on both economic outcomes and political pressure. If protests by traders and opposition parties intensify, the government may tweak certain rules, especially around compliance. Historically, GST has undergone multiple amendments since its launch in 2017, so adjustments to GST 2.0 are highly possible in the coming years.