GST 2.0: Tax Slabs Simplified To 5% And 18% SEBI Analyst Calls It A Win For Consumers, Strain For Insurers

The Goods and Services Tax (GST) regime in India is set for its most significant revamp since its launch. On September 3, the GST Council approved the long-awaited rationalisation of tax slabs. The system will shift from four primary slabs to just two-5% and 18%-with an additional 40% rate reserved for luxury and sin goods, effective September 22.

GST Rates: What Changed? 

SEBI-registered analyst Pradeep Carpenter explained that for years, India's GST framework operated on a four-slab structure (5%, 12%, 18%, and 28%), creating confusion and compliance hurdles. The Council's decision eliminates the 12% and 28% brackets, bringing most goods and services under the 5% or 18% umbrella. 

Luxury products, such as tobacco, alcohol, and certain high-end cars, will continue to attract a 40% sin/luxury tax rate, ensuring revenue neutrality while curbing excessive consumption. 

Who Benefits From GST 2.0?

Carpenter noted that consumers and the middle class would be the biggest beneficiaries of these GST reforms as essentials get cheaper. 

Footwear & Textiles: Products like footwear and apparel priced up to ₹2,500, earlier taxed at 12–28%, will now fall into the 5% bracket. 

Household goods & FMCG: Cooking oils, noodles, milk powder, chocolates, and packaged foods could become more affordable, adding to the festive-season cheer. 

Consumer durables: Air conditioners, refrigerators, televisions, and two-wheelers (earlier at 28%) will now be available at lower effective rates, potentially boosting demand. 

Insurance Sector: Individual health and life insurance premiums, previously taxed at 18%, are now exempt, resulting in policy costs being reduced by up to 15% for customers. He cautioned that insurers, however, may see short-term profitability strain as margins compress before repricing adjusts. 

Additionally, Carpenter highlighted that ease of doing business improves for small companies as MSME registration timelines are cut to 3 days, there will be faster refunds for exporters, and simplified compliance frameworks. Automated refunds mean quicker cash flows, aiding working capital management.

Market Impact: What To Watch

Carpenter said that the simplified GST structure is designed to spur consumption, particularly ahead of the festive season. Watch out for stocks in FMCG, consumer durables, retail, and auto sectors that are likely to benefit from improved affordability and a stronger sales outlook. Insurance companies may face near-term weakness. Broader indices could receive a sentiment boost from increased consumer demand and simplified compliance. 

On the other hand, the rate rationalization could result in a revenue loss of ₹47,000–48,000 crore annually. While states may face short-term stress, higher consumption is expected to offset this to some extent over time. 

Carpenter concluded that the real test will be in sustaining government revenues while unlocking demand. 

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