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The Goods and Services Tax (GST) Council has approved a sweeping reform of India’s indirect tax system, marking the most significant revamp since GST was rolled out in 2017. Starting September 22, 2025, the tax structure will be simplified into four slabs: 0%, 5%, 18%, and 40%.
The government has announced significant GST Rate Changes affecting multiple sectors. The changes are designed to lower the burden on essential goods and consumer products while keeping luxury and harmful products expensive.
Recent GST Rate Cut is expected to boost consumer demand and ease market pressure. Consumers can expect noticeable relief on daily-use products. UHT milk, breads, chapatis, and paranthas will fall into the nil-tax category and will, therefore, be tax-free.
The items that will have a GST reduction to 5% from a range of 12-18% will be butter, ghee, cheese, dry fruits, namkeen, and confectionery products.
With the revision, several categories are now classified as GST Cheaper Items. Even packaged drinking water, vegetable oils, and processed meat products will now be subject to a 5% tax.
Household essentials like toothpaste, toothbrushes, soap, shampoo, shaving cream, and hair oil will see a significant reduction in tax rate from 18% to 5%.
Common household goods, including utensils, feeding bottles, baby diapers, sewing machines, bicycles, and bamboo furniture, will also move into the 5% bracket.
Healthcare costs are expected to decrease since items such as thermometers, medical oxygen, diagnostic kits, spectacles, and glucometers will be taxed at a rate of only 5%. Life and health insurance policies are now tax-free, moving to a nil slab.
Certain products fall under the GST Costlier Items category, raising expenses for consumers. However, educational goods such as pencils, notebooks, erasers, maps, and charts are also now exempt from tax.
Small and eco-friendly vehicles are set to become more affordable. Petrol, CNG, and LPG cars with a displacement of under 1,200cc, along with motorcycles with a displacement of up to 350cc, will shift from the 28% slab to 18%.
Experts are analyzing the New GST Slabs to determine their long-term economic impact. Air conditioners, televisions above 32 inches, dishwashers, and projectors will also see their tax rate reduced to 18% from 28%.
To support farmers, fertilizers, pesticides, drip irrigation systems, and agricultural machinery will now attract just 5% GST.
Tractor parts and tyres also fall into this reduced slab. In construction, the use of cement is expected to see a significant reduction, from 28% to 18%, which will lower building costs.
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The reform maintains a high burden on “sin goods” and luxury consumption. Pan masala, gutkha, cigarettes, and tobacco products will continue to be taxed heavily, with an additional cess, until the loans taken for revenue compensation are cleared.
Significantly, taxes will be based on the retail sale price (RSP) and will no longer be based on transaction value, thereby tightening compliance.
Aerated and caffeinated beverages, such as soft drinks and energy drinks, will attract a sharp hike, moving to a 40% slab. Similarly, luxury vehicles exceeding 1,200cc, motorbikes exceeding 350cc, yachts, private jets, online wagering, and casinos will also bear a 40% rate.
