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Below the Perspective on GST 2.0 announcement by Mr. Arsh Mogre, Economist, PL Capital

“GST 2.0 is a genuine structural simplification—collapsing the rate grid to 5% and 18% with a 40% sin/ultra-luxury slab from 22 September—reorienting the tax system toward mass-consumption, health, and productive capital while pruning distortions in autos, durables, cement, and select services. The centre pegs the gross revenue cost at ~Rs.480bn (~0.15% of GDP); however, the distributional burden across states is uncertain and hinges on compensation design, the sin-slab (now including RSP-based levies on tobacco/pan masala), and compliance-led buoyancy gains—areas policymakers have flagged but not fully specified. On the demand side, large price-salient cuts (e.g., air-conditioners/TVs 28→18; small cars and ≤350cc 2-wheelers to 18; cement 28→18; tractors and key agri inputs 12/18→5; life/health insurance zero-rated) directly lift real disposable income and reduce user-costs in sectors with deep supply chains, supporting a near-term consumption impulse and capex-adjacent activity. On the macro-financial side, the longer-end sell-off reflects front-loaded fiscal concern, but the policy reaction function (RBI cuts of 50 bps to 5.0% with scope for OMOs and supply-timing tweaks) implies curve-steepening that should ease as inflation undershoots and efficiency dividends materialize. In FX, the reform credibly offsets part of tariff drag: MUFG projects USD/INR around 89.0 by 1Q26, with structural reforms and prospective Fed easing tempering INR downside. Net-net, the growth mix tilts toward domestic demand resilience; the key risks are state-centre fiscal compacting and whether sin-slab/administrative gains fully backfill the static revenue loss”.

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