India’s biggest overhaul of the Goods and Services Tax (GST) since its rollout in 2017, dubbed “GST 2.0”, officially comes into force today. The reform package, announced by Prime Minister Narendra Modi in a 19-minute televised address yesterday, has been described as the country’s “next generation GST reforms” — a move aimed at simplifying the tax structure and boosting consumer confidence ahead of the festive season.
Here are the major highlights of GST 2.0:
1. Life Insurance Policies Made GST-Free
All individual life insurance products — including term insurance, endowment policies, and ULIPs — are now fully exempt from GST. Reinsurance for these products has also been brought under the exemption.
2. Health Insurance Gets Relief
Individual health insurance policies, family floaters, and senior citizen health covers are exempted from GST, reducing costs for policyholders.
3. Transport Services
- Road transport: Passenger transport by road will continue at 5% without ITC, but operators can opt to pay 18% with ITC.
- Air travel: Economy class remains taxed at 5%, while business and premium classes continue at 18%.
4. Local Delivery Services
GST liability on deliveries made via e-commerce operators (ECOs) shifts to the ECO when services are provided by an unregistered vendor. If the provider is registered, they remain liable. Delivery services will attract a standard 18% GST.
5. Medicines Stay at 5%
The Finance Ministry clarified that medicines remain under the 5% GST slab rather than being exempted. A full exemption would block manufacturers from claiming input tax credits (ITC), raising production costs and retail prices.
6. Leasing and Renting of Goods
Leasing or renting goods without an operator will attract the same GST rate as the goods themselves. For instance, leasing a car without a driver will be taxed at 18%, matching the rate on car sales.
7. Imports Covered Under GST 2.0
The revised GST rates also apply to imports. Integrated GST (IGST) will be levied at the new rates unless specific exemptions are notified.
8. Milk Products: Dairy vs Plant-Based
- Exempted: Ultra High Temperature (UHT) processed dairy milk.
- Taxed at 5%: All plant-based alternatives such as almond milk and soy milk, which previously faced higher slabs of 12–18%.
9. Personal Care Products
GST rates on face powders and shampoos have been reduced, a move the Finance Ministry says is meant to simplify the framework rather than favour large corporations.
10. Toward “Atmanirbhar Bharat”
PM Modi hailed GST 2.0 as a decisive step toward a self-reliant India, stressing that the new framework will make compliance easier, cut costs for consumers, and strengthen India’s economic ecosystem.