The GST Council has approved the most sweeping reform since GST’s rollout in 2017, cutting down the current four-slab structure (5%, 12%, 18%, 28%) to just two main slabs — 5% and 18% — along with a special 40% levy on sin goods and super luxury items.
The new rates will take effect on September 22, 2025, except for tobacco and pan masala products which will continue under the current cess structure until pending state compensation loans are repaid.
Finance Minister Nirmala Sitharaman said the revamp is aimed at spurring demand, simplifying compliance, and easing the cost burden on households, particularly as India faces global trade headwinds and high US tariffs.
What Gets Cheaper?
Food & Beverages
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Zero GST: Chapati, parathas, pizza bread, paneer, UHT milk, khakra.
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5% GST (down from 18%): Butter, ghee, dry fruits, sugar confectionery, jams, fruit juice, beverages containing milk, ice cream, pastries, biscuits, cereals.
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Plant-based & soya milk drinks: 5% (down from 12–18%).
Household & Personal Care
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5% GST (down from 18%): Shampoo, soap, toothpaste, toothbrushes, hair oil, face powder.
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5% GST (down from 12%): Tableware, kitchenware, umbrellas, bicycles, bamboo furniture, combs.
Consumer Appliances & Electronics
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18% GST (down from 28%): Air-conditioners, dishwashers, televisions.
Stationery
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Zero GST: Erasers, maps, pencil sharpeners, exercise books.
Health & Insurance
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Zero GST: All individual life insurance policies (term, ULIP, endowment) and all individual health insurance policies including family floater and senior citizen plans.
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5% GST: Third-party goods carriage insurance (down from 12%).
Travel & Hospitality
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5% GST: Hotel rooms up to Rs 7,500/night (down from 12%).
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5% GST: Economy-class air tickets (down from 12%).
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12% GST: Business-class air tickets (down from 18%).
Automobiles & Auto Components
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18% GST (down from 28%): Small cars (under 1200cc petrol / 1500cc diesel), motorcycles up to 350cc, auto components.
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5% GST: Electric vehicles (unchanged).
Construction & Agriculture
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18% GST (down from 28%): Cement.
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5% GST (down from 12–18%): Agricultural machinery, hand pumps, drip irrigation equipment, fertiliser inputs, bio-pesticides, and tractor components.
What Gets Costlier?
Sin Goods & Super Luxury Items (40% GST)
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Pan masala, gutkha, tobacco products, cigarettes (post-compensation cess period).
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Carbonated & caffeinated beverages, aerated drinks with added sugar (up from 28%).
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Luxury vehicles: All cars above 1200cc (petrol)/1500cc (diesel) and >4000 mm length.
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Premium bikes: Motorcycles above 350cc.
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Personal leisure assets: Yachts, private aircraft, racing cars.
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Leisure services: Casinos, horse racing, betting, online money gaming, race club services.
Government & Industry Reaction
Prime Minister Narendra Modi called the reforms a “Diwali gift for the common man,” saying the move will “improve lives, ease doing business, and support small traders.”
Industry groups welcomed the decision, confirming they will pass on benefits to consumers ahead of the festive season. Economists believe the changes will spur demand and boost growth, even as some states expressed concerns about revenue loss and sought compensation.
