Lok Sabha Question No. 428 (UNSTARRED), answered on 2026-02-02
Subject: GST 2.0  and India's Economic Growth
Ministry: FINANCE
Asked by: Shri Yaduveer Wadiyar

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO.428

TO BE ANSWERED ON MONDAY, FEBRUARY 02, 2026 / Magha 13, 1947 (Saka)

## GST 2.0 and India's Economic Growth

## 428.  Shri Yaduveer Wadiyar:

Will the Minister of FINANCE be pleased to state:

- (a) the manner in which GST 2.0 is likely to support India's economic growth;
- (b) the expected contribution of the simplified slab structure and increased tax compliance to Gross Domestic Product (GDP) growth and formalisation;
- (c)  the  details  of  estimated  improvements  in  household  consumption  and  business  due  to reduced tax burden,  especially in sectors such as e-commerce and  essential healthcare  and economy; and
- (d)  the  manner  in  which  GST  2.0  enhances  ease  of  doing  business  and  strengthens  India's position  as  global  manufacturing  and  investment  destination  under  the  Viksit  Bharat  2047 vision?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a),  (b)  and  (c):  GST  2.0  has  simplified  and  rationalised  the  rate  structure  across  various industries. The reduction in tax burden on essential goods, services, and emerging sectors is expected  to  lower  the  cost  of  living,  improve  affordability,  and  stimulate  household consumption demand. At the same time, a simplified two-rate structure, is expected to reduce transaction costs, ease compliance, and encourage small businesses to enter the formal sector, thereby supporting greater formalisation, and widening the tax base.

Lowering  rates  across  sectors,  including  e-commerce,  essential  health  services,  and  basic consumer  items,  is  expected  to  enhance  trade  competitiveness  and  support  domestic manufacturing. These measures collectively are likely to boost GDP growth by stimulating consumption, encouraging investment, and promoting job creation.

Recent trends  in  high-frequency  indicators  such  as  higher  e-way  bill  generation,  improved Purchasing Managers' Index (PMI) readings for manufacturing and services, record festiveseason  automobile  sales,  robust  UPI  transactions,  and  increased  tractor  sales,  indicate strengthening economic momentum in September-December 2025 following the GST reforms. Furthermore,  as  per  the  NABARD  Rural  Economic  Conditions  and  Sentiments  Survey (November 2025), 79.2% of rural households reported increased consumption expenditure in the last one year, the highest among all bi-monthly rounds in FY 2025-26 so far.

(d): Aligned with the Viksit Bharat 2047 vision, GST 2.0 also strengthens India's position as  a  global  manufacturing  and  investment  destination.  Through  rate  reductions  across  key sectors, the GST 2.0 reform is expected to provide a strong stimulus to domestic industry and investment. Lower GST on cement and construction materials is expected to reduce project costs and accelerate the construction of real estate and infrastructure. The cut from 28% to 18% on small cars, two-wheelers and auto-parts is expected to boost demand and strengthen India's automotive manufacturing base. Reduced GST of 0% on life-saving drugs and 5% on medical devices  is  likely  to  improve  healthcare  access  while  encouraging  domestic  production. Similarly,  the  shift  to  a  5%  GST  on  toys,  handicrafts  and  man-made  fibres  is  expected  to support labour-intensive MSMEs and expand export potential, thereby collectively reinforcing India's growth and investment momentum under the reformed GST regime.

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