One year of GST 2.0. Who's it working for?

Snigdha Sharma (0:00)

I have something to ask of you before we start. You know, there is a word for the particular kind of autumn season that we experience in India. It's called Sharath. And Tagore came back to it again and again in his work. And it has very little to do with the Hollywood-inspired image that we have of red leaves and yellow leaves and pumpkin spice latte. Sharath is the season that comes after the rain. The sky suddenly looks bigger, the colors look brighter. If you pass by any river bank, you will see white cash flowers blooming, glistening in the sunlight. There is this refreshing feeling that the world has been washed clean. And that is the feeling that we're chasing. For the first time, my colleague and The Ken's CEO Rohin, who writes our wonderful Sunday newsletter, First Principles, and I from Daybreak, are making an autumn-inspired playlist built by you. So tell us, what does autumn feel like where you are? What's the little thing that tells you that it has arrived? And what is the one song that sounds like autumn to you?

Tell us why that song matters to you as well. We might read your answer on Daybreak, or even feature it on First Principles. It won't take more than three minutes, I promise. The link is in the show notes. I can't wait to hear from you. And now, on to today's episode.

Today marks one year since India re-wrote the way we pay tax on almost everything that we buy.

On the 22nd of September 2025, the biggest overhaul of GSD, the goods and services tax, since it began in 2017, came into force. The four main tax labs were compressed into two, 5% and 18%, with a separate 40% rate for luxury and sin goods. It touched almost every shelf. The government cut the tax on hundreds of everyday things. Soap, shampoo, toothpaste, packaged food, TVs, ACs, small cars, individual health and life insurance premiums were made completely tax free. The idea was to do two things at once. Make the tax system simpler and make it cheaper to buy things. The government estimated that the changes would have an annualized revenue implication of about 48,000 crore rupees based on the 2023-2024 consumption base. In return, it expected the lower tax burden to feed into consumption. One widely cited estimate from SBI research put the potential demand boost to close to 2 lakh crore rupees.

At the time, one much circulated calculation put the potential savings for a middle class household at 15,000 to 17,000 rupees a year. Just to make it clear, this came from a constructed basket of 15,000 rupees of monthly household spending. So it was an illustration of what was possible, not an estimate of what an average family could save.

And the government says that the experiment worked. The Finance Ministry says that it tracked 54 everyday products, brand by brand, and found that the benefit of the lower rates had been fully passed on to customers. It has also pointed to strong festive sales and record auto sales as evidence that the cuts helped to unlock demand. But away from the press conferences, at the kirana store, at the chemist shop, a lot of Indians still feel like the tax came down, but the bill did not quite follow. And then there's also a second question. Did GST 2 did the bigger thing that it was designed to do? Because this reform was also meant to make GST itself simpler for businesses. Cutting the number of slabs and clearing up the classification tangles that made the tax hard to navigate. And the timing matters too. Because in two weeks, on the 7th of October, the GST council will meet again. And this time, the focus is expected to be the next layer of the reform, which is the processes, compliance and the rules sitting underneath the rates.

Welcome to Daybreak, a business podcast from The Ken. I'm your host, Snigdha Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Varghese and I will come to you with one business story that's worth understanding and worth your time. Today is Tuesday, the 22nd of September.

There were two big promises buried in GST 2.0. One was that your shopping would get cheaper, and then second was that the tax itself would get simpler to deal with. Let's start with the first, because we have some early evidence. NIPFP, which is a public finance research institute set up with the finance ministry and other government and academic bodies, looked at the government's own consumer price index data. The CPI basically is a measure of how the prices people actually pay for a basket of goods and services move over time. The researchers took 355 items and compared their average CPI in the four months before the reform, which was May to August 2025, with the four months after it took effect to October 2025 to January 2026 So this is not the MRP printed on one shampoo bottle before and after, it is how the prices across these categories moved. And the pattern is quite striking. For some of the biggest purchases that we make, the data lines up with the effects of the tax cut being passed on. The GST on motor cars and jeeps fell from 28% to 18%, and their Consumer Price Index or CPI fell 7.52%.