Top 25 Questions on GST 2.0 with Answers – UPSC, Banking & SSC Exams

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by

Himanshu
in , ,

India’s indirect tax system has undergone a major transformation with the rollout of GST 2.0 from 22 September 2025. The revamped structure replaces the earlier complicated slab system with a simpler and more predictable framework. Because of its scale, it is now a key topic for UPSC, State PSCs, banking exams and other competitive tests. Below are 25 carefully selected questions and answers that explain the features, objectives and impact of GST 2.0.

1. What is GST 2.0 and how is it different from the old GST?

Answer: GST 2.0 is the new version of the Goods and Services Tax designed to simplify compliance and boost transparency. Unlike the old four-slab structure (5%, 12%, 18%, 28%), GST 2.0 has three main slabs — 5%, 18% and 40%. This change reduces confusion, cuts litigation and gives businesses a clearer cost structure.

2. When did GST 2.0 become effective?

Answer: GST 2.0 came into effect on 22 September 2025, ahead of the festive season, so that consumers and businesses could benefit immediately.

3. What is the rationale behind simplifying the slab structure?

Answer: The government wanted to make GST more user-friendly. Fewer rates reduce classification disputes, speed up compliance and improve ease of doing business — a key step to attract investment.

4. Why is there a 40% slab for some items?

Answer: The 40% slab ensures that goods considered harmful or highly luxurious (like tobacco, pan masala, high-end cars, sugary drinks) carry a higher tax. This helps compensate revenue lost from reducing taxes on essential goods and also discourages consumption of harmful products.

5. What types of goods now fall under the 5% slab?

Answer: Core essentials such as unprocessed food items, some medicines, basic toiletries and daily-use household goods. This relief helps control inflation in the items that affect the common man most.

6. Which goods are taxed at the standard 18% rate?

Answer: Most goods and services that are not essentials or “sin goods” now attract 18%. This includes mid-range electronics, packaged foods, hotels and restaurants (above threshold), furniture and consumer durables.

7. How are automobiles affected by GST 2.0?

Answer: Mid-range cars now attract only 18% GST (down from 28%), reducing costs for middle-class buyers. High-end luxury cars and large SUVs fall under the 40% slab, making them costlier.

8. What impact will GST 2.0 have on inflation?

Answer: By lowering taxes on essentials and common consumer goods, GST 2.0 is expected to moderate price rise for the average household. Some luxury items may see higher prices, but these affect only a limited segment of consumers.

9. How does GST 2.0 support “Make in India”?

Answer: Lower input taxes and a simpler rate structure reduce manufacturing costs. This improves competitiveness of domestic producers and encourages investment in Indian factories.

10. Does GST 2.0 change the input tax credit (ITC) mechanism?

Answer: No radical changes, but fewer slabs mean fewer classification disputes and faster settlement of ITC claims — a major relief for businesses.

11. How will small businesses benefit from GST 2.0?

Answer: With clearer slabs, compliance becomes simpler. Lower rates on inputs reduce working capital blockage. Many small traders in essential goods see their effective tax burden drop.

12. How is GST 2.0 expected to affect government revenue?

Answer: In the short run there may be some loss due to lower rates on essentials. However, higher rates on sin goods and better compliance through simplicity should offset the loss over time.

13. What happens to goods previously taxed at 12%?

Answer: Most such goods have moved either to 5% (if essential) or 18% (if standard), reducing complexity.

14. What happens to goods previously taxed at 28%?

Answer: Many of them are now at 18% (such as home appliances), except those categorised as luxury or harmful which have been moved to the 40% slab.

15. Does GST 2.0 cover services also?

Answer: Yes. The new slabs apply to both goods and services except those specifically exempted like education and healthcare.

16. What is the social impact of lowering GST on essentials?

Answer: It improves affordability for the poor and middle class, helps control food inflation and supports overall consumption, which drives economic growth.

17. How does the high slab discourage unhealthy consumption?

Answer: By making products like tobacco and sugary drinks more expensive, it nudges people to reduce consumption, aligning tax policy with public health goals.

18. Could GST 2.0 boost exports?

Answer: Yes. Cheaper inputs, faster credit refunds and a simpler structure lower export costs and make Indian goods more competitive abroad.

19. How will GST 2.0 improve ease of doing business?

Answer: Reduced slabs mean fewer disputes over classification, faster tax payments and easier forecasting of costs — especially important for MSMEs and start-ups.

20. Will GST 2.0 affect state finances?

Answer: States may see some short-term revenue changes, but the Centre has promised compensation adjustments. In the long term, better compliance is expected to stabilise state revenues.

21. How can GST 2.0 impact employment?

Answer: Lower taxes on manufacturing inputs can stimulate industrial growth, which may create more jobs. Cheaper consumer goods also spur demand, indirectly supporting employment.

22. Are there still zero-rated goods?

Answer: Yes. Some essential items such as unprocessed food grains and life-saving medicines remain exempt at 0% to ensure affordability.

23. What is the expected long-term benefit of GST 2.0 for the economy?

Answer: A more predictable, transparent and business-friendly indirect tax system that encourages investment, formalisation and sustained growth.

24. Why is GST 2.0 a hot topic for competitive exams?

Answer: It is India’s biggest indirect tax reform since 2017. It affects prices, inflation, fiscal policy and trade — all important for economics, polity and current affairs sections.

25. How should aspirants prepare for GST 2.0 related questions?

Answer: Understand not just the slab rates but also the rationale, objectives, economic impact and examples of goods in each slab. Practice both factual and analytical questions.

Key Takeaway

GST 2.0 is more than a rate change. It’s an effort to balance growth and fiscal prudence. It makes essentials cheaper, discourages harmful consumption, and aims to improve compliance — all of which affect citizens, businesses and government revenue.

Disclaimer

This article is for informational and educational purposes only. Readers should refer to official government notifications for exact GST classifications and compliance details.