GST 2.0 Propels India's Growth Amid Global Trade Challenges

India's GST 2.0 tax reforms drove economic growth in 2025 by simplifying the tax regime and bolstering domestic consumption, even as global trade faced disruptions. The reforms led to increased GST collections and surged digital payments, with the auto sector seeing significant benefits from reduced GST rates.

India's revamped tax regime under GST 2.0 has emerged as a pivotal factor in sustaining domestic consumption and driving economic growth in 2025 amidst global trade disruptions, a Rubix Data Sciences report reveals. Implemented in late September 2025, the reforms streamlined the indirect tax framework by consolidating five GST slabs into two primary rates: 5% for essentials and 18% for most goods.

Titled 'The Year That Tested Trade: How India Fared in 2025,' the report underscores the critical timing of these reforms in navigating a challenging global landscape marked by heightened tariffs, geopolitical tensions, and rising import costs. The swift impact of GST 2.0 is evident in the surge of tax collections, reaching Rs 1.96 trillion in October 2025, a 4.6% increase compared to the previous year.

Digital payments saw a remarkable spike during the rollout, with transaction values skyrocketing almost tenfold, as consumers accelerated purchases to benefit from reduced taxes. This tax reduction particularly buoyed the auto sector, with vehicle sales climbing 41.3% year-on-year in October 2025, signaling a revival of consumer demand.

Despite pressure on external trade, with merchandise exports stagnating and imports widening the trade deficit due to higher energy and gold costs, robust domestic consumption helped stabilize the overall economy. GST 2.0, along with government expenditures and festive demand, also spurred an 8.2% GDP growth in the third quarter of FY26, prompting the Reserve Bank of India to revise its growth forecast to 7.3% from 6.8%.

The long-term benefits of GST 2.0, such as enhanced economic formalization and improved business cash flows, are expected to bolster India's resilience amid ongoing global uncertainties. As international trade risks persist, the report anticipates domestic policy measures like GST reform will continue to play a crucial role in fostering growth.

(With inputs from agencies.)