The Goods and Services Tax (GST) regime in India underwent a major overhaul in 2025 to simplify taxation, reduce confusion, and make essential goods more affordable. The new GST rates take effect from 22 September 2025, replacing the previous multi-tier system with a streamlined structure that benefits consumers and businesses alike.
📊 New GST Slabs at a Glance
Earlier GST rates included 5%, 12%, 18%, and 28% slabs. The revised system introduces three clear slabs:
| New Slab | Applicability |
|---|---|
| 5% | Essential goods and basic services |
| 18% | Standard goods and services |
| 40% | Luxury and sin products such as high-end automobiles, tobacco, and aerated drinks |
This simplified structure ensures that daily essentials stay affordable while luxury or harmful products are taxed higher to discourage overconsumption.
🆕 Key Highlights of the New GST Rate Changes
1️⃣ Simplified Rate Structure
- Old System: 5%, 12%, 18%, 28%
- New System: 5% (Merit), 18% (Standard), 40% (Luxury/Sin)
- Impact: Lower compliance burden, faster tax computation, and reduced errors.
2️⃣ Introduction of 40% GST Slab
A special 40% rate applies to luxury and sin goods, including:
- Premium and high-end automobiles
- Tobacco products like cigarettes
- Aerated and carbonated drinks
This move raises revenue while discouraging consumption of non-essential or harmful items.
3️⃣ Wider Exemptions for Essential Goods
Essential categories like unbranded food items, basic healthcare, and education services continue to enjoy 0% GST, ensuring affordability for all income groups.
🛍️ Detailed New GST Rate List (Effective 22 Sept 2025)
| Category | Previous Rate | New Rate |
|---|---|---|
| Insurance (all individual life & health) | 18% | NIL |
| Hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware | 12% / 18% | 5% |
| Food Items – UHT milk, paneer, Indian breads | 5% | NIL |
| Packaged foods (namkeens, sauces, noodles, chocolates, coffee, butter, ghee, pasta) | 12% / 18% | 5% |
| Consumer Goods – TVs (all sizes), ACs, dishwashers, small cars, motorcycles ≤ 350cc | 28% | 18% |
| Agricultural Equipment – Tractors, threshers, composting machines | 12% | 5% |
| Labour-Intensive Goods – Handicrafts, marble/granite blocks, leather goods | 12% | 5% |
| Construction Material – Cement | 28% | 18% |
| Medicines – 33 lifesaving drugs, 3 rare-disease drugs | 12% / 5% | NIL / 5% |
| Medical Devices – Surgical/dental apparatus, diagnostic kits | 12% / 18% | 5% |
| Automobiles & Transport – Small cars, motorcycles ≤ 350cc, buses, trucks, ambulances | 28% | 18% |
| Auto parts (all) & three-wheelers | 28% | 18% |
| Textiles – Manmade fibre & yarn | 18% / 12% | 5% |
| Fertilizers – Sulphuric acid, nitric acid, ammonia | 18% | 5% |
| Renewable Energy Devices & Parts | 12% | 5% |
| Hospitality – Hotel rooms ≤ ₹7,500/day | 12% | 5% |
| Personal Services – Salons, gyms, yoga & wellness services | 18% | 5% |
🟢 0% GST Items (Exempted)
Essential goods remain completely tax-free, including:
Milk, curd, lassi, unbranded atta/maida, fresh vegetables & fruits, eggs, salt, prasad, children’s drawing books, basic health services, and educational services.
🟠 5% GST Items
Applies to most everyday necessities such as:
Sugar, edible oils, flour, soaps, toothpaste, shampoo, basic kitchen equipment, fans, and commonly used medicines.
🔵 18% GST Items
Covers standard goods and services, including:
Computers, TVs, mobile phones, packaged snacks, branded clothing, restaurant services, and entertainment.
🔴 40% GST Items
Luxury and sin goods now face a steep 40% GST, including:
Luxury cars and SUVs, tobacco products, cigarettes, cigars, and carbonated beverages.
💡 Impact on Consumers & Businesses
Items Becoming Cheaper
- Personal care products like soap, toothpaste, and shampoo
- Home appliances including refrigerators, washing machines, and ACs
- Small cars and electric vehicles
- Medicines and medical devices
Items Becoming Costlier
- Luxury automobiles from premium brands
- Tobacco products
- Aerated drinks and high-end soft beverages
🏆 Key Takeaways
- Simplified compliance for businesses with only two main GST slabs.
- Lower household expenses on essentials and healthcare.
- Higher revenue collection from luxury and harmful products.
- Balanced taxation that protects the common consumer while encouraging responsible spending.