New Delhi, Oct. 5 -- Nine years after its launch, India's goods and services tax (GST) has been rewired. GST 2.0, which took effect on 22 September 2025, collapsed the four-slab structure for consumer goods (5%, 12%, 18% and 28%) into two main rates of 5% and 18%. Special rates of 0.25% and 3% remain, and a new 40% rate applies to a few items. Of the 506 goods covered by the GST Council's recommendations, about 90% saw their rates cut.

Our estimates suggest the effective GST rate has fallen only from 11.64% to 11.30%, a modest sacrifice that follows a familiar logic: lower rates can over time increase collections by widening compliance and stimulating activity. While most of the debate has centred on revenue implications, the more import...