NEW DELHI, Sept 19: The Government’s launch of GST 2.0 promises to ease the tax burden on households, empower micro, small, and medium enterprises (MSMEs), and accelerate formalisation, while moving India closer to the vision of a unified tax system, according to a report by FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE).
The GST overhaul is expected to nearly triple the number of items taxed at 5 per cent, from 54 consumption categories under GST 1.0 to 149 categories under GST 2.0. For rural households, the share of exempt and merit goods in consumption baskets is projected to rise from 56.3 per cent to 73.5 per cent, while urban households will see an increase from 50.5 per cent to 66.2 per cent. This translates to a fall in effective GST incidence from 6.03 per cent to 4.27 per cent for rural families and from 6.38 per cent to 4.38 per cent for urban families, leaving more disposable income in consumers’ hands and stimulating spending on services, retail, and local businesses.
For MSMEs, the revised GST structure addresses distortions caused by the inverted duty system, enhancing efficiency and reducing compliance burdens. “GST introduced in 2017 transformed our taxation landscape, and now GST 2.0 builds on that foundation with simplified rate structures and greater efficiency. GST 2.0 truly embodies the vision of One Nation, One Tax,” said Anil Rajput, Chairman of FICCI CASCADE.
While GST 2.0 may result in short-term revenue loss, the report notes this will likely be offset by increased consumption, improved compliance, and wider coverage over time. Under GST 1.0, indirect tax collections doubled from Rs 11.78 lakh crore in 2018-19 to Rs 22.09 lakh crore in 2024-25, and the number of registered taxpayers rose from 66.5 lakh in 2017 to 1.51 crore in 2025.
The report also highlights that high GST rates under the previous system created arbitrage opportunities, fueling illicit trade. Between 2017-18 and 2022-23, illicit FMCG markets grew over 70 per cent, packaged foods nearly doubled, and illicit tobacco trade crossed Rs 41,000 crore, disproportionately affecting lower- and middle-income households.
By moderating the standard slab to 18 per cent and moving a wide range of essentials into the 5 per cent category, GST 2.0 is expected to reduce price gaps that drive smuggling and counterfeiting. This will strengthen consumer safety, protect legitimate businesses, and reinforce the formal economy, the report said.