The Goods and Services Tax (GST) Council, in its 56th meeting, has approved a major revamp of the tax structure, moving to a simplified two-rate system. Union Finance Minister Nirmala Sitharaman announced the decision on Wednesday, stating that the changes will take effect from September 22, 2025.
Key Highlights of the New GST Structure
- Two main slabs: 5% and 18%
- Special 40% slab: For sin goods like tobacco and luxury items such as yachts, helicopters, and large cars
- Effective date: September 22 (except for tobacco, which will transition later)
The Finance Minister said the reforms were carried out with a focus on easing the burden on the common man, benefiting households, farmers, health-related sectors, and labor-intensive industries.
Items Moving to Lower Tax Slabs
Several daily-use products will now become cheaper as they move to the 5% slab. These include:
- Hair oil, soap, shampoo, toothpaste, and toothbrushes
- Bicycles, kitchenware, and other household items
- Food items such as namkeens, sauces, pasta, noodles, chocolates, coffee, and butter
- Bio-pesticides, handicrafts, granite blocks, leather goods, and marble
Other notable changes:
- Cement: Reduced from 28% to 18%
- Indian breads, paneer, and milk: Reduced from 5% to 0%
- Air-conditioners, TVs, dishwashers, small cars, and motorcycles (≤350cc): Reduced from 28% to 18%
- 33 lifesaving drugs: Reduced from 12% to 0%
- Spectacles for vision correction: Reduced from 28% to 5%
Fixing Long-Pending Anomalies
The government also addressed inverted duty structures, which had been a long-standing issue:
- Manmade fiber: 18% → 5%
- Manmade yarn: 12% → 5%
- Fertilizers and chemicals (sulphuric acid, nitric acid, ammonia): 18% → 5%
Tobacco and Sin Goods
Currently, products such as cigarettes, gutka, bidi, and pan masala will remain under the 28% GST rate along with compensation cess. Once the Centre repays loans taken to compensate states, these items will shift to the 40% special slab.
What the Finance Minister Said
“These reforms have been carried out with the common man in mind,” said Finance Minister Nirmala Sitharaman. “Rates on essential items have been reduced, farmers and labor-intensive industries will benefit, and health-related sectors are being supported.”
