From Insurance to Shampoos: What GST 2.0 Means for Your Wallet

The much-anticipated "GST 2.0" overhaul, effective from September 22, 2025, brings a wave of tax cuts under the Goods and Services Tax (GST) regime, promising relief for consumers across various sectors. This second major revamp by the government aims to simplify the tax structure while making essential services and products more affordable. From insurance to transportation and personal care, here’s what you need to know about the changes that could impact your wallet.

Life and health insurance policies have received a significant boost under GST 2.0. All individual life insurance plans, including term insurance, endowment policies, and unit-linked insurance plans (ULIPs), are now completely exempt from GST. Similarly, individual health insurance policies, covering family plans and senior citizen-specific options, are also free from GST. Reinsurance for these policies has been included in the exemption, reducing costs for insurers and, ultimately, policyholders. This move is expected to make insurance more accessible, encouraging wider coverage among households.

Transportation services have seen nuanced changes to balance simplicity and flexibility. Road passenger transport continues to attract a 5% GST rate without input tax credit (ITC), keeping costs low for budget travelers. However, transport operators can opt for an 18% rate with ITC if it suits their business model. Air travel retains its existing structure: economy class tickets are taxed at 5%, while business and premium classes face an 18% rate. These unchanged rates ensure stability for travelers while offering operators tax credit options.

Also Read: GST 2.0 Reform Trims Mercedes Luxury Car Prices

Local delivery services, a growing sector due to e-commerce, have also been addressed. If an unregistered service provider delivers through an e-commerce operator (ECO), the GST liability shifts to the ECO. Registered providers, however, must handle their own tax payments. The GST rate for local delivery services is now standardized at 18%, providing clarity for both consumers and businesses in this rapidly expanding industry. This change aims to streamline compliance for e-commerce platforms while ensuring fair taxation.

Medicines, a critical area of concern, remain taxed at 5% rather than being fully exempt. The Finance Ministry explained that a complete exemption would prevent manufacturers from claiming ITC on inputs like raw materials and packaging, potentially increasing production costs and, consequently, medicine prices. By retaining the 5% rate, the government balances affordability with the industry’s ability to manage costs effectively, ensuring medicines remain accessible without disrupting the supply chain.

Leasing and renting of goods have been aligned with the tax rates of the goods themselves. For instance, leasing a car without a driver will attract the same 18% GST as purchasing the car. This principle extends to other goods, ensuring consistency in taxation whether you buy or lease. This clarity helps consumers make informed decisions when opting for leasing over outright purchases, particularly for high-value items like vehicles or equipment.

Imports are also affected by GST 2.0, with Integrated GST (IGST) now levied at the revised rates starting September 22, unless specific exemptions apply. This ensures that imported goods align with the new domestic tax structure, maintaining fairness in pricing. Consumers importing goods should check for any notified exemptions to understand the exact tax implications.

A notable change in the food sector is the exemption of Ultra High Temperature (UHT) processed dairy milk from GST, making it more affordable. However, plant-based milk products, such as almond and soya milk, are not included in this exemption. Previously, almond milk was taxed at 18% and soya milk at 12%. Under GST 2.0, all plant-based milk drinks are now uniformly taxed at 5%, reducing costs for consumers who prefer these alternatives while simplifying the tax structure.

Personal care products like face powders and shampoos have also seen tax relief. The GST rate on these items has been lowered to make them more affordable and to streamline the tax framework. The Finance Ministry emphasized that this reduction isn’t aimed at favoring large companies but at simplifying compliance and benefiting consumers. This change is likely to be welcomed by households looking to save on everyday essentials.

Overall, GST 2.0 is designed to make essential services and products more affordable while maintaining a balanced tax system. From insurance exemptions to simplified rates for delivery and leasing, these changes reflect the government’s effort to ease the financial burden on consumers and businesses alike. Keep an eye on how these adjustments play out in the market as businesses adapt to the new tax landscape.

Also Read: PM Modi’s GST 2.0 Revolution: Tax Cuts to Transform India’s Economy