New Delhi, September 4, 2025 – The Government of India has rolled out one of the biggest overhauls of the Goods and Services Tax (GST) since its launch in 2017. The reform, called GST 2.0, has simplified the tax structure by replacing four slabs (5%, 12%, 18%, 28%) with just two main slabs – 5% and 18%, along with a 40% rate for luxury and sin goods.
The new rates will come into effect from September 22, 2025, just before the festive season, giving consumers and businesses a much-needed boost.
Key GST Changes
✅ Essentials & Household Items
- Hair oil, soaps, shampoos, toothpaste, toothbrushes, kitchenware, and bicycles will now be taxed at 5% (earlier 12–18%).
- Paneer, roti, and basic Indian breads have been moved to the tax-free category.
✅ Food & Packaged Products
- Butter, cheese, ghee, jams, pasta, noodles, cereals, dry fruits, and snacks will now fall under the 5% slab instead of 12–18%.
✅ Healthcare & Insurance
- 33 life-saving drugs used in cancer and chronic disease treatment are now exempt from GST.
- Other medicines have shifted to 5% GST (earlier 12%).
- Health and life insurance policies will now carry 0% GST, directly benefiting households.
✅ Electronics & Appliances
- TVs, ACs, refrigerators, dishwashers, and washing machines move from 28% to 18%, cutting prices by up to 9%.
- Mobile phones and laptops remain at 18% GST.
✅ Automobiles
- Small hybrid cars, two-wheelers up to 350cc, and auto parts are now taxed at 18% instead of 28%.
- Luxury cars and premium vehicles will attract the new 40% slab.
✅ Agriculture & Farming
- Tractors, farm machinery, fertilizers, and pesticides are now at 5% GST, reducing costs for farmers.
✅ Travel & Hospitality
- Hotel stays up to ₹7,500 per night will attract 5% GST instead of 12%.
- Economy-class flight tickets will now carry 5% GST, while business class fares drop to 12% (earlier 18%).
Impact of GST 2.0
- Consumers: Lower prices on essentials, food, electronics, and travel.
- Healthcare: Cheaper medicines and GST-free insurance mean reduced medical burden.
- Businesses: Simplified compliance and better demand during the festive season.
- Farmers: Reduced costs on equipment and inputs, supporting rural growth.
Economic Outlook
While the government expects some short-term revenue loss, higher consumer demand and easier compliance are projected to balance the gap. Economists see GST 2.0 as a reform that will boost affordability, encourage spending, and strengthen India’s growth momentum.
