Taresh Gupta
When the Goods and Services Tax (GST) came into effect in July 2017, it was billed as a revolution-“one nation, one tax.” It replaced a messy patchwork of central and state levies with a unified system. But what followed was more complicated. Multiple rate slabs, endless disputes over classification, and heavy compliance burdens soon turned the “good and simple tax” into something more confusing.
Now, with GST 2.0, the most sweeping reform since its launch, the government has attempted to fix those flaws. From September 22, 2025, Indians will live under a simpler structure: just two broad slabs-5% for essentials and 18% for most other goods and services-alongside a special 40% rate for luxury and sin items like tobacco, pan masala, and premium cars.
This is not just technical tinkering. It’s a realignment that touches households, businesses, and governments alike. For families in Jammu, Srinagar, or Sopore, it shows up directly at the grocery counter. For artisans in Pampore or hoteliers in Gulmarg, it changes the way they price their goods and services. For policymakers, it offers both relief and risk: lower prices and stronger demand, but also concerns about revenue.
Relief at the Household Level
The most immediate impact of GST 2.0 will be felt by families. Essentials-milk, paneer, medicines, daily-use personal care items, agricultural machinery, and insurance premiums-are all taxed at the lighter 5% rate. For middle-class households, even bigger-ticket items like refrigerators, washing machines, two-wheelers, and small cars will now fall into the more affordable bracket.
Take a household in Jammu city. Their monthly expenses on groceries, medicines, and utilities could fall by several hundred rupees. That money doesn’t vanish-it gets spent elsewhere, whether on children’s education, savings, or small luxuries that were earlier postponed. In Baramulla or Anantnag, a farming family will save on equipment and insurance, easing their cost of cultivation.
For regions like J&K, where inflation has been felt keenly in the past two years, this relief is not abstract. It is tangible, visible, and timely.
Tourism: A Sector Ready to Bounce Back
Perhaps no industry stands to benefit more in J&K than tourism. Once taxed at 12%, hotel stays now attract just 5% GST. That simple change could be transformative.
Tourism in the Valley has always been sensitive-to politics, security, and global trends. After the recent Pahalgam attack, visitor numbers dipped, leaving hotels and guesthouses worried about their survival. The rate cut comes as a lifeline. Cheaper stays can lure back domestic tourists, especially families from Delhi, Punjab, and Maharashtra who weigh costs closely when planning holidays.
Imagine a family booking a week-long stay in Srinagar. A 7% saving on room tariffs may sound small, but multiplied over hundreds of bookings, it makes a big difference to hoteliers and travel operators. Local guides, taxi drivers, shikara boatmen, and handicraft sellers-who all rely on the tourist ecosystem-stand to benefit indirectly.
Handicrafts and SMEs: A Heritage Revived
Kashmir’s identity is tied to its crafts: Pashmina shawls, carpets, papier-mâché art, walnut wood furniture. These are not just products but legacies passed through generations. Yet artisans have struggled with rising input costs and stiff competition from machine-made substitutes.
Lower GST on raw materials, combined with a simpler two-slab system, reduces costs and clears up classification disputes that once plagued traders. A shawl weaver in downtown Srinagar or a carpet seller in Budgam can now price their goods more competitively in domestic and export markets.
For small and medium enterprises (SMEs) across Jammu’s industrial hubs-whether in Gangyal, Bari Brahmana, Samba or Kathua-simpler taxation means more than just lower costs. It means fewer arguments with tax officers, less time spent on paperwork, and more energy focused on production and sales. SMEs form the backbone of employment in J&K, and giving them breathing space is key to sustainable growth.
Agriculture and Horticulture: The Rural Backbone
Agriculture remains J&K’s largest employer, and horticulture-particularly apples, walnuts, and saffron-is its pride. Lower GST rates on farm machinery and crop insurance are a direct incentive for farmers to invest in productivity.
An apple grower in Sopore investing in better cold storage, or a saffron farmer in Pampore insuring his crop against unpredictable weather, will now pay less in taxes. The result is better margins and greater security. Over time, these savings can translate into higher quality produce and more competitive exports, cementing J&K’s reputation in national and global markets.
A Fairer Tax System
At the heart of GST 2.0 is a principle of fairness. Essentials are taxed lightly, luxuries heavily. This creates a system that feels just and equitable. Families struggling with daily expenses are shielded, while those who can afford luxury cars or premium products contribute more. This balancing act is particularly important in J&K, where income disparities are wide. By ensuring that the burden is not placed on essential consumption, the reform protects vulnerable households and strengthens the social contract between taxpayers and the state.
The Revenue Question
The cheer does come with a caveat. Chief Minister Omar Abdullah has warned that J&K could face a 10-12% shortfall in GST collections, roughly ?1,000 crore annually. For a Union Territory already dependent on central transfers, this is no small figure.
Business associations like the ICC Jammu have echoed this concern, pointing out that revenue losses could limit the administration’s ability to invest in public services and infrastructure. A reduction in inflows, they argue, risks widening the fiscal deficit.
Yet history shows that lower taxes and simpler compliance often broaden the tax base. As more transactions come into the formal economy, and as demand expands, revenues tend to stabilize. J&K’s real opportunity lies in using GST 2.0 to expand its economic activity-attract more tourists, revive handicrafts, and boost agriculture-so that the pie itself grows larger.
Why Optimism Outweighs Anxiety
There is reason to be optimistic. Analysts expect GST 2.0 to shave 0.5 to 1.1 percentage points off inflation nationwide. Consumption is set to rise, particularly during the festive season. For J&K, where demand is often linked to tourist arrivals and agricultural cycles, this timing is critical.
Revenue concerns are genuine, but manageable. The Centre, which has already budgeted for a national revenue cost of ?48,000 crore, has both the fiscal space and the political incentive to support revenue-deficit regions like J&K through transitional aid. What matters more is how local industries seize this opportunity.
A Chance to Rebuild Confidence
Beyond economics, reforms like GST 2.0 build confidence. They show citizens that government policy can adjust, correct, and deliver relief. For J&K, which has lived through political turbulence and economic uncertainty, confidence is not a small thing. It is the foundation of recovery.
A Srinagar shopkeeper who sees his monthly filings simplified, a Jammu family that saves on groceries, a Baramulla farmer who invests in better machinery-all of them are reassured that the system is working with them, not against them. That reassurance matters as much as the rupees saved.
Celebrating the Step Forward
GST 2.0 is not the final word on tax reform. There will be further adjustments, and challenges remain. But it is a bold step in the right direction.
For India as a whole, it promises lower prices, higher demand, and simpler compliance. For Jammu and Kashmir, it promises revival-of tourism, of handicrafts, of agriculture, and of household confidence. Yes, revenue will need to be managed, but optimism outweighs anxiety. If paired with central support and smart local policies, the reform can transform J&K’s economy in ways that go beyond numbers. In households across the Union Territory, relief is already being felt. In businesses large and small, hope is returning. That is the spirit of GST 2.0: not just a tax change, but a festival of relief and renewal.
(The author is a Chartered Accountant)
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