On 22 September India’s GST system is going to become even simpler from 2025. From now on there will be just two GST slabs, 5% and 18%. GST will be reduced on essentials, food and healthcare. But a new 40% tax slab will be levied on luxury and sin goods. Old GST and cess rates will be levied on tobacco and related products.
GST Reform 2025: What is changing and when?
The GST Council has approved major reforms due to which the tax structure will become simpler. Now most of the goods and services will fall into these two categories:
- 5% GST on merit and essentials goods
- 18% GST on standard goods and services
These new GST rates will be applicable from 22 September 2025, the first day of Sharad Navratri.
Until the compensation-cess liabilities are cleared, the old GST and cess rates will continue to be applicable on tobacco, gutkha and cigarettes.
CBIC (Central Board of Indirect Taxes and Customs) will release detailed notifications and FAQs so that the transition is smooth.
Big relief on Essentials, Food and Healthcare
Now daily household expenses will be reduced. Now only 5% GST will be levied on daily essential items like hair oil, soaps, shampoos, toothbrushes and toothpaste which was 12–18% earlier.
Now 5% GST will be levied on packaged food items like noodles, pasta, sauces, chocolates, coffee, butter and ghee. Its direct effect will be seen in grocery bills.
Healthcare sector has got the most relief:
- 0% GST will now be applicable on life and health insurance premiums.
- 0% GST will be applicable on life-saving medicines.
- Only 5% GST will be applicable on medical devices and diagnostic products.
The Council is saying that this step will make healthcare more affordable and accessible.
Autos, Housing and Travel also benefit
The new GST rates will benefit middle-class consumers a lot:
- Small cars and motorcycles (up to 350cc) will now attract 18% GST, which was earlier 28% GST.
- From now on, air-conditioners and TVs will also attract 18% GST.
- Cement, which is used in housing and construction, will now attract only 18% GST, down from 28%.
- Hotels booking up to ₹7,500/night will now attract only 5% GST, which will boost Indian tourism and festival travel.
Experts are saying that this decision will increase consumer demand and will boost festival shopping.
Luxury and Sin Goods will remain expensive
GST has been reduced on essentials and mid-range products, but luxury and sin goods will become expensive, a new GST slab will be imposed on them now.
Now old GST and cess rates will be imposed on tobacco, gutkha, bidis and cigarettes. The new tax structure will be implemented only after the compensation-cess issue is cleared.
CBIC has warned businesses that if the benefits of GST cut do not reach consumers, strict action will be taken against them under profiteering case.
Bottom Line: GST New Rates 2025
From 22 September 2025, India’s GST system will become simpler and consumer-friendly.
- Essentials, packaged food and healthcare will be cheaper
- Insurance premiums will become GST-free
- GST will also be less on autos, cement and travel
But luxury and sin goods will remain expensive as they will now be subject to a new 40% tax slab.
Businesses and consumers should wait for CBIC’s official circulars and notifications for final product details.
For more details – Recommendations of the 56th Meeting of the GST Council held at New Delhi
