RECENT CHANGES IN GST RATE

Here's an updated summary of the recent changes in GST rates in India, effective from September 22, 2025, based on the latest official announcements and analyses:

Key Highlights of the GST Overhaul

1. Simplified Slabs: Introducing GST 2.0

The GST Council has streamlined the tax structure, eliminating the 12% and 28% slabs. The new framework comprises:

5% – “Merit” or consumer-essential goods

18% – Standard goods and services

40% – Premium "sin and luxury" goods (e.g., tobacco, high-end products)

2. Effective Date

These changes are scheduled to take effect from 22 September 2025. Goods and services (except for certain tobacco-related items) will transition on this date, with a phased implementation for the remainder.

3. Goods and Services Affected

5% Slab – Essential and Everyday Items

Covers numerous household staples like packaged food, toothpaste, shampoo, soap, medicines, and insurance (life & health)—now GST-exempted or revised to 5%.

Agricultural tools, such as tractor parts and tyres, are also taxed at just 5%.

18% Slab – Standard Goods & Services

Consumer durables and electronics, such as air conditioners, televisions, dishwashers, and cement, now attract 18%, down from up to 28%.

Automobiles:

Small petrol/CNG/LPG cars (≤ 1200 cc and ≤ 4000 mm) now 18% (down from 28%)

Other vehicles, including three-wheelers, buses (10+ seats), ambulances, and trucks, are uniformly taxed at 18%

Motorcycles:

Up to 350 cc: 18%

Above 350 cc: 40%

Bicycles: reduced to 5%

Health club, salon, and fitness services: 5% (without ITC)

Certain exemptions and clarifications—for example, provisions for hotel service taxation have been simplified.

40% Slab – Luxury and Sin Goods

High-end, premium, and sin goods such as tobacco, sin products, and certain luxury vehicles are now taxed at 40%, replacing the earlier 28% + cess structure.

Compensation cess on tobacco and related items remains until cess-related obligations are cleared, after which the 40% will apply.

Sector-Wise Impact: Winners and Losers

Winners: Consumers benefit from cheaper essentials (food items, toiletries, medicines), budget travel and dining (restaurants at 5%, economy airfares cheaper), and more affordable small vehicles and appliances. Key sectors such as FMCG, consumer durables, and EVs could see boosted demand.

Losers: Higher taxes on apparel priced above ₹2,500 and sin goods might impact discretionary spending and luxury segments.

Summary Table of GST Rate Changes