Mumbai: The Goods and Services Tax (GST) Council, in one of its most crucial decisions since the inception of GST in 2017, has approved a sweeping overhaul of tax rates to simplify the structure and ease consumer burden. Effective September 22, 2025, the new reforms aim to create a more balanced tax system, invigorate domestic demand, and give relief to households across India.
The reforms consolidate the GST regime into two primary slabs—5% and 18%—with a special 40% rate for luxury and sin goods. Union Finance Minister Nirmala Sitharaman said the move was designed to correct anomalies, rationalize taxes, and make essential items cheaper.
What Has Become Cheaper
Daily Essentials and Food Items
- Chapatis and Parathas: All varieties of chapati, roti, and paratha will now be completely tax-free (0% GST), reduced from the earlier 5%.
- Paneer, Butter, and Ghee: Basic household foods such as paneer, butter, and ghee will now attract only 5% GST, down from 12-18%.
Household Goods
- Utensils, Kitchenware, and Tableware: Taxes reduced from 12% to 5%.
- Toothpowder, Combs, Feeding Bottles, Umbrellas, and Bicycles: These will now be taxed at 5% instead of 12%, making everyday essentials more affordable.
- Bamboo Furniture: Tax cut to 5%, supporting eco-friendly products.
Personal Care Products
- Shampoo, Soap, Talcum Powder, Toothpaste, Toothbrush, and Hair Oil: Drastically reduced from 18% to just 5%, ensuring lower household expenditure on hygiene and grooming.
Insurance and Healthcare
- Life and Health Insurance Policies: Now completely exempt from GST, a move aimed at encouraging more people to buy insurance for financial security.
- Life-saving Cancer Drugs: Will be zero-rated, ensuring affordability for critical healthcare.
Cement and Construction
- Cement: Tax rate cut from 28% to 18%, expected to bring down construction costs and give a boost to the housing sector.
Automobiles and Transport
- Small Vehicles (Petrol, LPG, and CNG under 1,200cc / 4,000mm length, Diesel under 1,500cc): GST slashed from 28% to 18%.
- Motorcycles up to 350cc: Now taxed at 18% instead of 28%.
- Electric Vehicles (EVs): Continue to enjoy a concessional 5% GST rate to encourage green mobility.
Consumer Durables
- Air Conditioners, Dishwashers, and Televisions: All shifted from 28% to 18%, making electronics and home appliances significantly cheaper ahead of the festive season.
What Remains Expensive
While most essentials got cheaper, the Council kept a special 40% GST slab for luxury and sin goods:
- Premium Automobiles: Cars above 1,200cc (petrol) and 1,500cc (diesel) or exceeding 4,000mm length.
- Motorcycles above 350cc, Yachts, Aircrafts, and Racing Cars.
- Tobacco, Gutkha, and Cigarettes: These remain at 28% plus compensation cess, until the government clears loans taken to compensate states for revenue shortfall during the pandemic years.
