New Delhi: India’s second major overhaul of the Goods and Services Tax (GST), popularly called GST 2.0, came into force today, marking what Prime Minister Narendra Modi described as “next-generation GST reforms” during a 19-minute televised address. The Prime Minister said the move represents a decisive step towards building an aatmanirbhar Bharat (self-reliant India), with wide-ranging tax cuts and changes across key sectors.
Under the new framework, all individual life and health insurance policies — including term, endowment, ULIPs, family and senior citizen health plans — have been made completely exempt from GST. Reinsurance of individual life policies also comes under this exemption. Passenger transport rates, however, remain largely unchanged: road transport will continue at 5 per cent without input tax credit (ITC), though operators can opt for 18 per cent with ITC, while economy air travel stays at 5 per cent and business or premium classes at 18 per cent.
For local delivery services, the government has clarified that if the provider is unregistered and operates through an e-commerce platform, the tax liability shifts to the platform itself. Registered providers, on the other hand, will continue to be responsible for paying GST. All such delivery services are now set at a standard rate of 18 per cent.
Medicines remain taxed at 5 per cent instead of being fully exempt. The Finance Ministry explained that a complete exemption would prevent manufacturers from claiming ITC on inputs like raw materials and packaging, ultimately raising production costs. Similarly, leasing or renting of goods without an operator will now attract the same GST rate as the goods themselves — for instance, leasing a car will be taxed at 18 per cent, in line with the GST on car sales.
The revised GST rates under this new regime also extend to imports, with Integrated GST (IGST) now applicable at the updated rates unless specifically exempted. A key distinction has been made between dairy and plant-based milk: while Ultra High Temperature (UHT) processed dairy milk is now fully exempt, plant-based alternatives such as soya, almond, and other milk substitutes will uniformly attract 5 per cent GST, down from earlier rates of 12–18 per cent.
Consumers will also see relief in the personal care segment, as GST on face powders and shampoos has been reduced. The Finance Ministry clarified that the move is aimed at simplifying the tax structure rather than favouring any particular industry. Together, these reforms under GST 2.0 are expected to ease costs for households, streamline compliance for businesses, and provide a boost to India’s push for a simplified and more inclusive tax system.
