GST Revamp 2025: Big Relief for Consumers, Select Items Face Hike
- India adopts a two-tier system 5% and 18% making essentials, food, household items, healthcare, and small cars cheaper.
- Tobacco, carbonated drinks, high-end cars, and leisure services will attract 40% GST.
- Changes aim to boost domestic spending, ease compliance, and stimulate economic growth.
In a historic move set to reshape everyday spending, the GST Council has announced the most sweeping overhaul of India’s consumption tax since its launch in 2017. This bold reform is designed to simplify the tax maze, lighten the cost of everyday essentials, and give a boost to domestic spending all at a time when global economic pressures, including U.S. tariffs on Indian goods, are testing the nation’s resilience.
The Council, chaired by Union Finance Minister Nirmala Sitharaman, approved a two-tier GST system. Under the new system, most items will attract tax rates of either 5 percent or 18 percent, replacing the current four slabs of 5, 12, 18, and 28 percent. A special 40 percent rate has been proposed for certain luxury goods and tobacco products. The revised rates, covering almost all products except pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco, and bidi, will come into effect from September 22, coinciding with the first day of Navratri.
The overhaul is expected to significantly affect everyday consumption items, household goods, healthcare products, automobiles, construction materials, and more. At the same time, select luxury items and tobacco-related products will see an increase in tax rates.
What Gets Cheaper
Food and Beverages
A wide range of daily-use food items will become cheaper under the new GST regime. All forms of chapati and paranthas will attract nil GST, down from the current 5 percent. Similarly, ultra-high temperature milk, chena or paneer, pizza bread, and khakra will also be exempted from tax.
Common use food and beverages, including butter, ghee, dry nuts, condensed milk, sausages, meat, sugar-based sweets, jam, fruit jellies, tender coconut water, packaged drinking water, fruit pulp, fruit juice, milk-based beverages, ice cream, pastries, biscuits, corn flakes, and cereals, will see their tax rate drop from 18 percent to 5 percent. Other fats and cheese will also attract 5 percent GST, down from 12 percent.
Plant-based milk drinks, including soy milk, will now be taxed at 5 percent, making these alternatives more affordable for consumers.
Household Items
The overhaul brings relief for household goods as well. Products like tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture, and combs will see their GST reduced from 12 percent to 5 percent.
Personal care items including shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap, and hair oil will also attract just 5 percent GST, down from 18 percent.
Household Appliances
Consumer electronics, such as air conditioners, dishwashers, and TVs, will now attract 18 percent tax, reduced from the current 28 percent, making these essential appliances more affordable.
Stationery Items
Educational and stationery items also benefit under the new rates. Maps, charts, globes, pencils, sharpeners, crayons, pastels, exercise books, and notebooks will now be taxed at nil rate instead of 12 percent. Erasers will also see their GST reduced to zero from 5 percent.
Footwear and Textiles
Mass-market footwear and textiles have seen a rate cut from 12 percent to 5 percent, helping reduce costs for everyday clothing and shoes.
Healthcare Products
Life-saving medicines, health-related products, and some medical devices will now attract 5 percent or nil tax, down from 12-18 percent earlier. Rates on thermometers have been reduced to 5 percent, while medical grade oxygen, diagnostic kits, glucometers and test strips, and corrective spectacles will also cost less.
Insurance Policies
Individual life and health insurance policies will now be exempt from GST. Third-party insurance for goods carriage will attract 5 percent tax with input tax credit, reduced from 12 percent.
Hotels and Flights
Hotel rooms priced up to Rs 7,500 will attract 5 percent GST, down from 12 percent with ITC. Similarly, economy class airline tickets will now be taxed at 5 percent.
Vehicles and Auto Components
Small vehicles and motorcycles benefit under the new regime. Motorcycles up to 350 cc and small hybrid cars will be taxed at 18 percent, down from 28 percent, while electric vehicles continue to enjoy 5 percent GST. Auto components will now attract 18 percent tax instead of 28 percent. Fuel-efficient small vehicles, including petrol, LPG, and CNG vehicles under certain engine capacities, as well as diesel vehicles meeting specific criteria, will also be taxed at 18 percent.
Construction and Machinery
Construction materials like cement will see their GST cut from 28 percent to 18 percent. Sewing machines and parts, agricultural machinery including tractors, hand pumps, drip irrigation equipment, sprinklers, composting machines, and other equipment for soil preparation, harvesting, and threshing, will attract 5 percent tax, reduced from 12 percent.
Fertilizers and Biopesticides
Key fertilizer inputs, including sulphuric acid, nitric acid, and ammonia, will now be taxed at 5 percent. Various biopesticides such as Bacillus thuringiensis variants, Trichoderma species, neem-based pesticides, and others will also benefit from the rate reduction. Micro-nutrients covered under the Fertiliser Control Order, 1985, will attract 5 percent GST.
Beauty and Wellness Services
Services offered by health clubs, salons, barbers, fitness centers, and yoga classes will now be taxed at 5 percent, down from the earlier 18 per cent, promoting affordable wellness services for citizens.
What Gets Costlier
While most items see a reduction, some categories will become more expensive under the new GST structure.
Aerated and Caffeinated Drinks
Popular soft drinks, including Coca-Cola and Pepsi, along with other non-alcoholic beverages containing added sugar or flavors, will attract a steep 40 percent GST, up from the current 28 percent. Caffeinated beverages and other aerated drinks will also be taxed at 40 percent.
Luxury Vehicles and Motorcycles
Automobiles above 1,200 cc, motorcycles over 350 cc, yachts, private aircraft, and racing cars will attract 40 percent GST, targeting the luxury segment.
Tobacco Products
Tobacco and related products, including cigarettes and chewing tobacco, will continue to be taxed at 28 percent plus compensation cess until state losses from Covid-19 compensation are repaid. After that, these products will fall under the 40 percent slab.
Leisure and Gaming Services
Services linked to leisure and gaming, such as horse racing, casinos, lotteries, online money gaming, and race club services, will now attract 40 percent GST, aiming to regulate discretionary spending on these activities.
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