India's GST framework underwent major restructuring after the 56th GST Council reforms introduced in September 2025. Commonly referred to as GST 2.0, these reforms focused on simplifying tax slabs, rationalising rates, and reducing classification disputes.

For businesses, the changes affect product pricing, Input Tax Credit calculations, invoicing, ERP systems, and working capital planning.

What Is GST 2.0? GST 2.0 refers to the revised GST rate structure and compliance reforms introduced after the 56th GST Council meeting. The reforms aimed to simplify GST slabs, reduce disputes, rationalise taxation, and improve compliance efficiency.

The New Simplified Slab Structure: The revised GST structure now includes 0%, 3%, 5%, 18%, and 40% (demerit category). The earlier 12% slab was largely rationalised across several sectors.

Which Goods Moved from 28% to 18%? Several consumer goods including consumer appliances, select electronics, and certain household goods shifted from 28% to 18%, reducing the tax burden on consumers.

Which Goods Moved from 12% to 5%? Many essential and mass consumption goods in FMCG, packaged essentials, and daily use products shifted to 5% to simplify classification.

The Removal of Compensation Cess on Automobiles: Compensation cess was removed or restructured on certain automobile categories, significantly impacting pricing models and dealership tax calculations.

How GST 2.0 Affects Vehicles: Smaller cars may now attract 18% GST, while luxury and demerit vehicles may attract an effective 40% rate. Manufacturers, dealers, fleet operators, and leasing businesses should reassess pricing and ITC planning.

Impact on Input Tax Credit Calculations: Businesses should reconcile existing inventory, vendor invoices, ERP tax mapping, and GST return classifications to ensure correct ITC treatment.

Industries Most Affected: FMCG, automobiles, consumer durables, hospitality, retail, and e-commerce are the most impacted sectors.

Action Checklist: Businesses should review GST rate mapping, product classifications, invoice formats, accounting software configuration, vendor reconciliation, ITC calculations, and pricing strategy immediately.

Alkesh Patel & Company provides GST advisory, reconciliation review, compliance support, and tax consultation services to help businesses navigate GST changes efficiently.

If you have not yet obtained your GST registration, read our guide on GST registration in India for who needs it and how to apply. Also see our detailed breakdown of GST on mobile phones and electronics.