India's GST 2.0 — simplifying a tax to build one national market
Indirect tax · tax incidence · allocative efficiency · demerit-good taxation
The situation
India's Goods and Services Tax launched in 2017 to replace a tangle of central and state taxes. In its biggest overhaul since, GST 2.0 took effect on 22 September 2025: the old 5/12/18/28% structure was collapsed into two main slabs — 5% and 18% — with a 40% slab for sin and luxury goods, and essentials and insurance moved to nil or 5%.
The economics
On the standard indirect-tax diagram, supply shifts up by the tax and the burden splits between consumers and producers according to relative price elasticities of demand and supply. But the deeper point is structural: replacing a cascading web of overlapping taxes with a single, simpler system reduces distortions and helps create a unified national market — lowering compliance costs and classification disputes.
The evaluation
For — a genuine single market, fewer classification disputes, lower compliance burden, and cheaper essentials. Against — the remaining slabs still distort choices; small firms bear compliance and IT costs; indirect taxes are regressive; and the government faces a revenue-versus-relief trade-off.
This is a taste of the full bank
These four are part of a larger set of carefully chosen real-world examples — each picked to stretch across several syllabus areas, with built-in evaluation and the deployment phrases that turn a fact into marks. I share the complete bank with my students. Book a free class and let's talk about how it fits your exam.