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The Goods and Services Tax (GST) Council, in its 56th meeting, approved sweeping reforms to the eight-year-old indirect tax system. After a marathon discussion lasting over ten hours, the Council paved the way for a simplified two-rate structure of 5% and 18%, with a special 40% slab reserved exclusively for super luxury, sin, and demerit goods.
Finance Minister Nirmala Sitharaman, who chaired the meeting attended by representatives of 31 states and Union Territories, announced that all the rate changes—except those related to tobacco—will come into force on September 22, coinciding with the first day of Navratri.
Focus on Relief & Ease of Doing Business
The reforms are aimed at lowering the tax burden on ordinary citizens, reducing compliance complexity, and releasing blocked working capital. Automated registration and refund processes are also being introduced to improve the ease of doing business.
Prime Minister Narendra Modi welcomed the consensus, stating that the Council’s collective decision will benefit farmers, MSMEs, middle-class families, women, and youth. He stressed that the wide-ranging changes would “improve the lives of citizens” while empowering small traders and businesses with simpler taxation.
NEXT-GEN GST REFORM
for Ease of Living & to build Aatmanirbhar Bharat
| Items | From | To |
|---|---|---|
| Hair Oil, Shampoo, Toothpaste, Toilet Soap Bar, Tooth Brushes, Shaving Cream | 18% | 5% |
| Butter, Ghee, Cheese & Dairy Spreads | 12% | 5% |
| Pre‑packaged Namkeens, Bhujia & Mixtures | 12% | 5% |
| Utensils | 12% | 5% |
| Feeding Bottles, Napkins for Babies & Clinical Diapers | 12% | 5% |
| Sewing Machines & Parts | 12% | 5% |
| Items | From | To |
|---|---|---|
| Tractor Tyres & Parts | 18% | 5% |
| Tractors | 12% | 5% |
| Specified Bio‑Pesticides, Micro‑Nutrients | 12% | 5% |
| Drip Irrigation System & Sprinklers | 12% | 5% |
| Agricultural, Horticultural or Forestry Machines for Soil Preparation, Cultivation, Harvesting & Threshing | 12% | 5% |
| Items | From | To |
|---|---|---|
| Individual Health & Life Insurance | 18% | Nil |
| Thermometer | 12% | 5% |
| Medical Grade Oxygen | 12% | 5% |
| All Diagnostic Kits & Reagents | 12% | 5% |
| Glucometer & Test Strips | 12% | 5% |
| Corrective Spectacles | 12% | 5% |
| Items | From | To |
|---|---|---|
| Petrol & Petrol Hybrid, LPG, CNG Cars (not exceeding ~ 1200 cc & 4000mm) | 28% | 18% |
| Diesel & Diesel Hybrid Cars (not exceeding ~ 1500 cc & 4000mm) | 28% | 18% |
| 3 Wheeled Vehicles | 28% | 18% |
| Motor Cycles (350 cc & below) | 28% | 18% |
| Motor Vehicles for transport of goods | 28% | 18% |
| Items | From | To |
|---|---|---|
| Maps, Charts & Globes | 12% | Nil |
| Pencils, Sharpeners, Crayons & Pastels | 12% | Nil |
| Exercise Books & Notebooks | 12% | Nil |
| Eraser | 5% | Nil |
| Items | From | To |
|---|---|---|
| Air Conditioners | 28% | 18% |
| Television (above 32") including LED & LCD TVs | 28% | 18% |
| Monitors & Projectors | 28% | 18% |
| Dish Washing Machines | 28% | 18% |
Automatic registration within 3 working days for applicants:
- Identified by the system based on data analysis
- Who determines that he would not pass Input Tax Credit exceeding ₹2.5 Lakh per month and opts for the Scheme
Sanction of Provisional Refunds by proper officer, through system based risk evaluation for:
- Zero Rated Supplies
- Supplies with Inverted Duty Structure
“The next generation of GST reforms are a gift for every Indian this Diwali. Taxes for the general public will be reduced substantially. Our MSMEs & small entrepreneurs will get huge benefit. Everyday items will become cheaper and this will also give a new boost to the economy.”
Also Read | How Modi’s GST 2.0 Will Fuel Startup Growth
Essentials & Daily Items Become Cheaper
The GST Council slashed taxes on a range of everyday essentials and food products. Items such as packaged fruit juices, butter, cheese, condensed milk, pasta, coconut water, soya drinks, nuts, dates, and sausages will now attract a reduced tax rate of 5% instead of 12%. Ultra-high-temperature milk, paneer, pizza bread, khakra, plain chapatis, and even school erasers have been moved to the zero-GST category.
Personal care and household goods too have seen major relief. Products like hair oil, shampoos, soaps, toothbrushes, toothpaste, bicycles, tableware, and kitchenware will now be taxed at just 5%, down from 12–18%.
Automobiles & EVs See Big Relief
Durable consumer goods such as air conditioners, large televisions, dishwashers, and refrigerators will now fall under the 18% GST bracket, reduced from the earlier 28%. Smaller cars—those with petrol engines up to 1200 cc and diesel engines up to 1500 cc—will also move into the 18% slab. Motorcycles with engines under 350 cc and auto parts have similarly been shifted to the lower rate, while bigger cars will attract the newly introduced 40% rate.
The GST on electric vehicles, however, remains unchanged at 5%, reinforcing India’s push toward sustainable mobility.
Health, Insurance & Services Exempted
One of the most significant changes is the complete GST exemption for health and life insurance policies, including ULIPs, endowment plans, term life, family floater, and senior citizen policies. This move is expected to make insurance more affordable for individuals and families.
Medical products such as medical-grade oxygen, gauze, bandages, and diagnostic kits have also been reduced to 5% GST, while several essential healthcare products have been shifted to the zero-tax slab.
In addition, services widely used by ordinary citizens—such as gyms, salons, barbers, and yoga centres—will now face a reduced 5% GST instead of 18%, easing the cost of personal care and wellness.
Also Read | Semicon 2025: India Makes Electronics Up to 30% Cheaper, Says Ashwini Vaishnaw
End of Multiple Slabs
With these reforms, India bids farewell to the earlier multiplicity of GST rates—5%, 12%, 18%, and 28%. The new streamlined system now features two main slabs: 5% for essential and common-use items and 18% as the standard rate. The 40% demerit rate is reserved only for sin goods such as tobacco, pan masala, and luxury automobiles.
The GST 2.0 framework is being hailed as a game-changer for consumers, small businesses, and the broader economy, arriving just in time for the festive season.
