India embarked on a new era of taxation today, September 22, 2025, with the implementation of its "next-generation" Goods and Services Tax (GST) reforms, often referred to as GST 2.0. This major overhaul, announced earlier by Finance Minister Nirmala Sitharaman, primarily streamlines the tax structure from four slabs to two broad rates: 5% and 18%.
Prime Minister Narendra Modi addressed the nation on the eve of these reforms, highlighting their potential to accelerate India's growth story and bring significant relief to the poor and middle class. He emphasized that the reforms coincide with the auspicious start of Navratri, marking it as a "GST savings festival" (Bachat Utsav) that will increase savings and ease purchases for citizens. The Prime Minister also stressed the importance of self-reliance and urged citizens to embrace "Made in India" products to strengthen the national economy.
Under the new GST regime, a wide array of household items, cars, TVs, and bikes are expected to become cheaper. Many food items, including roti, parantha, paneer, and khakra, have been moved to the NIL or 0% tax bracket. The reforms also impact services, with hotel rooms up to ā¹7,500 becoming more affordable due to reduced GST rates, and individual health insurance premiums becoming GST-free. For homebuyers, the GST on cement has been reduced from 28% to 18%, potentially leading to lower housing prices. The auto sector is also a significant beneficiary, with effective tax rates, including cess, reduced from 35-50% to a flat 40%. Combining income tax relief and GST reductions, the decisions taken over the past year are projected to result in savings exceeding ā¹2.5 lakh crore for the people of India.
Maharashtra Chief Minister Devendra Fadnavis echoed these sentiments, stating that the second phase of GST reforms will not only boost India's economy but also directly benefit common citizens, further strengthening the path towards 'aatmanirbhar Bharat' (self-reliant India).
In other significant economic news, foreign portfolio investors (FPIs) have continued to withdraw from Indian equities in September, with a net outflow of ā¹7,945 crore so far this month. This trend is largely attributed to global uncertainties and geopolitical tensions. Despite a brief period of buying after the US Federal Reserve's rate cut, FPIs remain net sellers in the equity market, though Indian debt markets have seen positive inflows. The Indian IT sector, in particular, has seen significant outflows from foreign institutional investors, totaling nearly ā¹62,000 crore this year, amid concerns about weak earnings, slowing global demand, and potential AI-driven revenue declines.