GST slabs simplified to just two main rates, bringing relief to millions of households and boosting economic growth.
What is GST 2.0?
India’s Goods and Services Tax system is undergoing its biggest overhaul since its launch in 2017. Starting September 22, 2025, the GST rates will move from a complex structure of four slabs (5%, 12%, 18%, 28%) to a simplified model mainly with two rates: 5% and 18%, plus a new 40% ‘demerit’ rate for luxury and sin goods such as high-end cars and tobacco products.
This reform aims to reduce confusion, make tax compliance easier for businesses, and bring down prices on everyday essentials for consumers.
What Will Get Cheaper?
- Everyday items like hair oil, shampoo, packaged foods, footwear, and basic medicines will move to the lower 5% slab or even become zero-rated.
- Electronics like TVs, refrigerators, and air conditioners will now be taxed at 18% instead of 28%.
- Affordable cars and bikes (under 1200cc and 350cc respectively) will benefit from a reduced 18% GST rate.
- Health and life insurance premiums are fully exempt from GST.
- Agricultural equipment and many educational materials will also see lower taxes.
What Will Get Costlier?
- Luxury cars, premium motorcycles, tobacco products, aerated beverages, and certain sin goods will face a new GST rate of 40%, up from the previous 28%.
- This higher rate targets indulgence and harmful consumption, aiming for better social and fiscal balance.
Who Benefits?
- Middle-class families and daily consumers will notice savings on numerous household essentials.
- Small businesses and farmers will face simpler tax filing and fewer disputes.
- The government expects these changes to stimulate demand and economic growth, particularly ahead of the festive season.
When Will These Changes Take Effect?
All new rates will apply nationwide starting September 22, 2025. Tobacco products and related sin goods will transition as per further government notifications.
GST Rates Comparison Table
| Category | Item/Example | Old GST Rate Till Sep 21, 2025 | New GST Rate From Sep 22, 2025 |
|---|---|---|---|
| Daily Essentials | Milk, bread, curd | Nil | Nil |
| Personal Care | Hair oil, shampoo, soap | 18% | 5% |
| Dairy Products | Butter, ghee, cheese | 12% | 5% |
| Health & Insurance | Life & health insurance | 18% | Nil |
| Electronics | TVs, ACs, refrigerators | 28% | 18% |
| Automobiles | Small cars (<1200cc), bikes (<350cc) | 28% | 18% |
| Agricultural Machinery | Tractors, drip irrigation | 12%-18% | 5% |
| Stationery | Pencils, notebooks, maps | 12% | Nil/5% |
| Hotel Tariffs | Up to ₹7,500 | 12% | 5% |
| Luxury Goods & Sin Products | Luxury cars, tobacco, aerated drinks | 28% | 40% |
Why Is This Reform Important?
- It simplifies GST from four slabs to mainly two, making tax rates easier to understand.
- It reduces tax burdens on daily necessities, directly lowering expenses for consumers.
- The higher tax on luxury and harmful goods aims to promote fairness in taxation.
- The reform is expected to boost consumption, support manufacturing, and generate greater tax compliance.
This landmark GST 2.0 reform marks a new chapter in India’s indirect tax system, providing substantial relief to ordinary citizens while ensuring fiscal responsibility through targeted taxation of luxury goods.
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