GST 2.0: Historical Evolution, Structural Reform, and Emerging Economic Signals

Abstract

The Goods and Services Tax (GST) reform implemented in September 2025 represents one of the most consequential structural adjustments to India’s indirect taxation system since its introduction in 2017. The shift from a multi-slab structure to a rationalised framework comprising two principal rates, 5 percent and 18 percent, along with a 40 % sin and luxury slab, marks a deliberate policy move towards simplification, compliance enhancement, and stimulation of consumption. This paper undertakes a comprehensive sector-wise examination of reform, focusing on automobiles, pharmaceuticals, insurance, and fast-moving consumer goods (FMCG). Drawing from available monthly and quarterly data, the paper explores how the reform interacted with seasonal demand, consumer behaviour, and industrial expectations. The findings indicate early signs of demand revival in the automobile and FMCG sectors, supported by stable GST collections in the months immediately following the reform. The analysis suggests that the 2025 GST rationalisation aligns with India’s broader objective of strengthening economic resilience through domestic consumption. The paper concludes by outlining key policy considerations necessary for sustaining reform gains, including compliance monitoring, MSME support, and continued evaluation of sectoral performance.