The government's announcement of GST 2.0 is expected to significantly ease the tax burden on households, empower MSMEs and accelerate the process of formalisation, bringing India closer to the long-standing vision of a single tax regime, according to a report by FICCI's Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE).
The report highlights that GST 2.0 will nearly triple the share of items taxed at 5%, increasing from 54 consumption categories under GST 1.0 to 149 categories. This restructuring is aimed at reducing consumer tax incidence and boosting affordability.
For households, the benefits are substantial. The share of exempt and merit goods in the consumption basket of rural families is projected to rise sharply from 56.3% to 73.5%, while for urban households, it will grow from 50.5% to 66.2%. Consequently, the effective GST incidence for rural families is expected to fall from 6.03% to 4.27% and for urban families from 6.38% to 4.38%. This reduction translates into higher disposable income, likely to fuel spending in services, retail and local businesses.
On the business front, particularly for MSMEs, GST 2.0 proposes rationalised rates that address the long-standing issue of the inverted duty structure, ensuring greater efficiency and ease of compliance.
"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 the Chairman of FICCI CASCADE.
While the study acknowledges a possible short-term revenue loss under GST 2.0, it argues this will be offset by higher consumption, improved compliance and wider tax coverage in the medium term.
Data also shows that the GST system has already strengthened India's tax base. Indirect tax collections have doubled since the rollout of GST 1.0, from Rs 11.78 lakh crore in 2018-19 to Rs 22.09 lakh crore in 2024-25. Furthermore, the number of GST taxpayers has surged from 66.5 lakh in 2017 to 1.51 crore in 2025, underscoring the success of GST in expanding India's formal economy.
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