India’s proposed GST 2.0 is being framed as the biggest reform to the indirect tax system since 2017: India’s upcoming GST 2.0 announcement, slated for implementation by Diwali, is being widely promoted in the media as a “Diwali gift” - a measure to reduce burdens on everyday consumers. Prime Minister Modi’s Independence Day speech has already prompted headlines calling it “a brighter gift of simpler taxes” and a “gamechanger” for GST.
Media reports indicate that the reform architecture may not stop at two slabs. Instead, a third slab at 40% for sin and luxury goods - such as tobacco, pan masala, luxury vehicles, and online gaming - has emerged as a key proposal, even though the government has yet to explicitly frame the reform in terms of revenue neutrality. Consumption impact (SBI Research): Instead, the narrative remains focused on the symbolic “festival gift” aspect, with little public detail on how state finances will be protected.
This paper explores whether GST 2.0 - amid external trade headwinds and strong political symbolism - can deliver meaningful simplification, uplift consumption, and preserve fiscal integrity, or whether it risks replicating structural complexity under a festive banner.