03/09/2025
On September 3, 2025, the GST Council made significant revisions to India's Goods and Services Tax structure, transitioning from four slabs to a simplified two-rate system of 5% and 18%. These changes are set to be implemented on September 22, 2025, with exceptions for certain products. A new 40% rate was also created for luxury and "sin" goods.
Key changes approved by the GST Council
GST Structure Rationalization
Two-tier system: The previous four tax slabs (5%, 12%, 18%, and 28%) have been consolidated into a two-tier structure.
New slabs: The new standard rates are 5% and 18%.
Special 40% rate: A special, higher rate of 40% has been created for certain luxury and "sin" goods, which will be implemented after outstanding compensation cess loan payments are settled.
Impact on goods and services
Food items:
Nil GST: UHT milk, paneer, and Indian breads like roti and paratha are now tax-exempt.
5% GST: Packaged items such as butter, ghee, nuts, chocolates, coffee, and namkeen have been moved to the 5% slab.
Household goods:
5% GST: Daily essentials, including toothpaste, hair oil, soaps, and bicycles, are now taxed at 5%.
18% GST: Home appliances like air conditioners and televisions have moved to the 18% slab.
Automobiles:
18% GST: The tax rate for small cars and motorcycles up to 350cc has been reduced from 28% to 18%.
18% GST: Commercial vehicles like buses, trucks, and ambulances will now have a uniform 18% rate.
40% GST: A 40% tax will apply to luxury cars, SUVs, and motorcycles over 350cc.
Healthcare and insurance:
Exemptions: Individual life and health insurance premiums are now exempt from GST.
Nil GST: Several life-saving drugs for cancer and chronic illnesses will no longer be taxed.
5% GST: Diagnostic kits, reagents, and monitoring systems have been moved to the 5% slab.
Implementation timeline
General implementation: The revised rates for most goods and services will take effect on September 22, 2025.
To***co products: Existing rates and compensation cess for products like pan masala and ci******es will continue until loan obligations are paid off.
