GST 2.0 India: ITC, Inverted Duty, and Why Insurance & IPL Teams Are Protesting

Sep 9, 2025

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in Economic News, Finance and Accounting

The Indian government’s GST 2.0 reforms, effective from 22 September 2025, have restructured the Goods and Services Tax framework to simplify compliance and reduce tax burdens on common households. Essentials like milk, ghee, paneer, and bread are now cheaper, while industries such as insurance, food delivery, and sports franchises (IPL teams) are voicing strong concerns.

In this blog, we break down what GST 2.0 is, explain ITC (Input Tax Credit) and Inverted Duty, and explore why some sectors feel ignored or unfairly burdened.

GST 2.0 – The New Structure

Earlier, GST had four tax slabs – 5%, 12%, 18%, and 28%. Under GST 2.0, the system has been simplified into:

5% slab – Essential items and FMCG products.
18% slab – General services and non-essential consumption.
40% slab – Luxury and sin goods.

This change has benefitted households but created friction for service-heavy industries.

Input Tax Credit (ITC) – The Basics

Input Tax Credit (ITC) is the mechanism that allows businesses to claim credit for the tax they have already paid on inputs.

Example:

A restaurant buys raw materials worth ₹1,000 with 5% GST (₹50).
It sells meals worth ₹2,000 with 18% GST (₹360).
Final GST liability = 360 – 50 = ₹310.

This avoids double taxation and keeps costs lower.

Inverted Duty Structure – A Sticking Point

An inverted duty structure arises when input taxes are higher than output taxes, creating a mismatch and refund delays.

Example:

A textile unit buys yarn at 18% GST but sells finished clothes at 5%.
Input GST paid is higher than output GST collected.
Businesses face refund delays, locking up working capital.

Even after GST 2.0, many industries argue that refund issues and inverted duty complications remain unresolved.

Why the Insurance Sector Is Upset

Insurance premiums continue to attract 18% GST under GST 2.0. This applies to:

Life Insurance (term, endowment, ULIPs, retirement plans)
Health Insurance (individual, family floater, senior citizen covers, critical illness)
General Insurance (motor, property, fire, travel, liability)

Impact:

Policyholders pay higher premiums as no relief was given.
Insurers fear reduced demand, especially among middle-class families.
Industry leaders argue that insurance is an essential service and should not be taxed like luxury services.

Why Zomato, Swiggy & Food Delivery Apps Are Angry

Online food delivery remains taxed at 18%, while dine-in restaurants enjoy 5% GST.
Delivery platforms cannot fully claim ITC, raising their effective costs.
This means customers pay more for online orders than for dining in.

Food delivery companies claim that GST 2.0 has created a pricing imbalance between restaurants and aggregators.

Why IPL Teams & Sports Franchises Are Furious

Sports franchises, including IPL teams, are hit hard by the new GST slabs:

18% GST applies to sponsorships, ticket sales, broadcasting rights, and commercial deals.
With no slab reduction, operating costs for franchises rise.
Advertisers and fans bear the burden, making sponsorships costlier and tickets more expensive.

Franchise owners argue that sports contribute to employment, entertainment, and national pride, and should receive preferential tax treatment.

Winners vs Losers of GST 2.0

Category	GST Impact	Outcome
Households	Essentials down to 0% & 5%	Groceries & dairy products cheaper
FMCG Sector	Lower GST slabs	Boost in sales volume
Insurance	18% GST slab	Higher premiums, weaker demand
Food Delivery Apps	Still 18%, no ITC benefit	Higher online ordering costs
IPL & Sports Franchises	18% GST on tickets/sponsorships	Costlier for fans & advertisers
Small Businesses	Simplified slabs	Easier compliance

Consumer Impact – What Gets Cheaper & What Doesn’t

Cheaper (0%–5% Slabs):

Milk, Paneer, Ghee, Butter, Cheese
Roti, Pizza Bread, Khakhra
Condensed Milk, Plant-based Milk Drinks
Chocolates, Pasta, Baked Goods, Namkeens

No Relief (Still 18% Slab):

Insurance premiums (life, health, general)
Food delivery services (Zomato, Swiggy, etc.)
IPL tickets, sports sponsorships & broadcasting deals

Final Thoughts

GST 2.0 is a double-edged sword. On one hand, it brings huge relief to households with cheaper essentials and a simplified tax structure. On the other hand, it leaves service-heavy industries like insurance, food delivery, and sports franchises frustrated.

While common people will save on kitchen items, they may continue to pay more on insurance premiums, food deliveries, and entertainment. The government may face growing pressure from these industries to reconsider slabs or provide exemptions in the future.