GST 2.0 Reform in India: Real Change or Political Optics?

In his Independence Day address from the Red Fort, the Prime Minister declared a ‘Diwali gift’ for the nation, a bold reform in the Goods and Services Tax (GST) structure. Promising simplification and rationalization of tax slabs, the announcement was wrapped in the language of relief, generosity, and reform.

Since then, the media machinery and government officials, from the Finance Minister to party spokespersons have gone on a full-blown campaign, hailing this as the advent of “GST 2.0.” But in the thick fog of propaganda and public relations, one must ask: Is this really a gift? Is it truly reform? Or is it merely a reactive measure cloaked in rhetorical flourish?

Not a Gift, but a Necessity

Let us begin with the most problematic framing calling this a gift. A gift is something offered voluntarily, out of goodwill, without expectation or pressure. But the so-called reforms in GST did not emerge from a position of generosity. They are, in fact, born of economic compulsion and geopolitical strain.

The origin of these changes can be traced back to the global trade tensions triggered by former U.S. President Donald Trump’s tariff wars. As Indian exports suffered, domestic industries flailed, and the economy shrank under rising global pressure, the government had little choice but to offer domestic relief hence the restructuring of GST.

To call this a “gift” is to insult the intelligence of the citizenry. If Trump had not imposed punitive tariffs, it is quite likely that this government would have happily persisted with the broken, regressive GST regime that has plagued businesses and consumers alike since its inception.

GST: From One Nation, One Tax to One Nation, Many Confusions

When the GST was introduced in 2017, it was touted as the biggest indirect tax reform in independent India’s history a “one nation, one tax” framework that would simplify compliance, eliminate cascading taxes, and boost the ease of doing business.

Instead, what we got was a tangled web of tax slabs, exemptions, and contradictions. At one point, there were six GST slabs:

0%
5%
12%
18%
28%
And a de facto 40% on sin goods (like luxury cars, tobacco, etc.)

Each product, each service, each sector was shoehorned into this confusing lattice, often with absurd outcomes.

Examples of Contradiction:

Popcorn Taxation:
- Plain popcorn: 5% GST
- Salted popcorn: 12%
- Caramel popcorn: 18%
  Same core product, drastically different tax implications.
Sanitary Products:
- Sanitary pads and tampons, both essential menstrual hygiene products, were taxed differently.
- It took years of activism just to get sanitary pads zero-rated.
Erasers:
Even something as basic as a rubber eraser was taxed inconsistently depending on its material composition.

Such examples weren’t just technical oversights; they were symptoms of a fundamentally flawed tax philosophy.

So, What Has Changed? And What Hasn’t?

The government now claims to have moved to just two GST slabs, implying a cleaner, simpler system. This is not entirely accurate.

The truth:

The 5% and 18% slabs remain unchanged.
The 12% slab has been eliminated, with items either moved to 5% or 18%.
28% and 40% slabs continue for luxury and sin goods.
0% (zero-rated) items remain, but are curiously omitted from the government's narrative.

So in reality, only one slab (12%) has been removed. The claim of “two slabs” is misleading at best, and deceptive at worst.

If simplification were truly the goal, why stop halfway?

The Minimum We Deserve, Not a Bold Leap

Let us not confuse remedial action with visionary reform.

Correcting absurdities like differentiating between salted and caramel popcorn, or taxing essential medicines and sanitary products is not reform. It is belated correction of errors that should never have existed in the first place.

Consider these examples:

Cancer Drugs:
Life-saving, prohibitively expensive, and often unavailable these should always have been zero-rated. Doing it now is the bare minimum, not a masterstroke.
Medical Insurance (Mediclaim):
In a country where only a fraction of the population is insured, taxing health insurance at 18% was regressive. Reducing that now is common sense, not reform.

The real question is: Why did these irrationalities persist for so long? And why should their correction now be seen as a triumph?

Taxing the Rich, Hurting Jobs

The government has maintained higher GST rates on luxury goods and services rooms in 5-star hotels, luxury cars, etc. in the name of taxing the rich. A room costing over ₹7,500 now attracts a whopping 40% GST.

This is a populist move, but it is not without consequences.

Luxury hotels and high-end service industries are major job creators. Each 5-star hotel room can generate up to five jobs directly or indirectly. Punishing such employment-intensive sectors through high taxes undermines job creation at a time when India needs it the most.

The same applies to the automobile sector. GST rates are linked to engine capacity and vehicle length a policy that encourages carmakers to game the system.

Car makers design cars with just under 4 meters in length and slightly below 1200cc engines to fall in the lower tax bracket.
This results in sub-optimal design, safety compromises, and lower revenue for the government.

Is this simplification? Or is it just another labyrinth?

What’s Still Missing? The Big Three

Despite all the self-congratulatory noise, petrol, diesel, and alcohol remain outside the GST structure.

These are major contributors to state and central revenues. Keeping them out of GST defeats the very spirit of a unified tax system. The government has no clear answer for this glaring exclusion because it refuses to be questioned.

There is no robust institutional space to challenge such decisions. In a functioning democracy, major tax policy should be debated, scrutinized, and transparent. Instead, we have announcements from the podium and decisions ratified afterward.

A Case of Too Little, Too Late

Yes, some steps taken are welcome.
Yes, they reduce irrationality.
But the timing and scale raise a critical concern: Why now, and why so little?

If a basic level of common sense is being passed off as economic reform, then we must redefine what reform actually means.

This is not a bold vision. This is a bureaucratic clean-up after a decade of flawed design. If we must borrow a line from Hindi idiom:

“Der aaye, lekin durust nahi aaye.”
(It’s late, and still not quite right.)

Conclusion: The Need for Honest Reform

Reforming GST is not just about reducing slabs it is about restoring rationality, equity, and transparency to India’s tax regime.

The structure must be simplified ideally to two or three slabs at most.
Essential goods must be zero-rated.
High job-generating sectors should not be punished with luxury taxes.
Fuel and alcohol must be brought under GST.
And finally, tax policy must be made more accountable, with space for public debate and expert critique.

Until then, let us not confuse policy clean-up with economic reform. The citizens of India deserve more than a cleverly marketed “gift.” They deserve a tax system that is fair, efficient, and forward-looking.