GST Reforms 2025 List: Goods and Services Tax (GST) reforms are set to be implemented from tomorrow onwards, September 22, marking a historical shift in the country’s indirect taxation with two slabs of
5 per cent and 18 per cent and a special slab of 40 per cent for sin goods.
The GST council, led by Finance Minister Nirmala Sitharaman, early in September announced a major overhaul in the indirect taxation system, aimed at simplifying the slabs, boosting the consumption and rationalizing the rates.
Under the new plan, the government is set to merge the four slabs into two main categories with an additional “sin tax” bracket:
- 5% slab — for essential goods.
- 18% slab – for most other goods and services.
- 40% slab – for luxury and sin goods such as tobacco, alcohol, betting, and online gaming.
This consolidation is expected to make tax compliance easier and also reduce prices on many items currently taxed at 12% or 28%.
Consumers will see essential items becoming cheaper from September 22, as several sectors from FMCG to Auto have announced earlier to pass on the benefits of lower GST to them.
What May Get Cheaper for You
Everyday Essentials: Many household products, which are currently taxed at 12% are expected to move down to the 5% slab. This includes:
- Toothpaste, soaps, and shampoos.
- Packaged foods like biscuits, snacks, and juices.
- Dairy items such as ghee and condensed milk.
- Bicycles and stationery.
- Apparel and footwear below a certain price point.
- Why It Matters: For middle-class households, even small reductions on daily-use goods can add up to significant monthly savings.
- Household Appliances & Electronics: Items that currently sit in the 28% bracket could be brought down to 18%, making them cheaper by as much as 7-8%. These include:
- Air conditioners.
- Refrigerators and dishwashers.
- Large-screen televisions.
- Cement (important for construction and housing).
- Why It Matters: This could be a big boost for India’s growing middle class, making appliances and electronics more affordable.
- Automobiles: The automobile sector is expected to benefit significantly.
- Small cars (engine size under 1,200cc) could see GST cut from 28% to 18%.
- Two-wheelers, a backbone of Indian mobility, may also move to a lower slab.
- Larger luxury cars and SUVs would continue to be taxed at higher rates.
- Why It Matters: Lower taxes on small cars and two-wheelers could revive demand in a sector that has seen fluctuating sales. Auto companies such as Maruti Suzuki, Hyundai, and Tata Motors could benefit from increased consumer demand.
- Insurance And Financial Services: Currently, insurance premiums attract 18% GST, making them relatively costly. Under GST 2.0, premiums may be moved to a lower slab, or in some cases, exempted.
- Why It Matters: Lower insurance costs can increase coverage among middle-income households, boosting financial security and reducing vulnerability to medical or life risks.
What Will Stay Costly
Not everything will get cheaper under GST 2.0. The government has made clear that certain goods will face higher taxes under the 40% “sin tax” slab.
- Tobacco products, alcohol, and pan masala.
- Online betting and gaming platforms.
- Petroleum products remain outside GST for now, meaning fuel prices will not see relief.
- Luxury items like diamonds and precious stones are also expected to retain higher tax rates.
Why The Reform Matters For The Indian Economy
Boosting Consumption: With prices dropping on essentials, appliances, and vehicles, households will likely spend more. This could deliver a strong push to consumption just before the festive season.
Market Sentiment: The stock market has already reacted positively. The Nifty 50 surged more than 1% in the immediate aftermath of the announcements. Auto and consumer goods stocks saw the sharpest gains.
Growth Outlook: Economists estimate that the new GST structure could add 0.7–0.8 percentage points to India’s GDP growth by stimulating demand and easing compliance burdens.
Everyday Impact: For consumers, the changes will show up in three ways:
Cheaper shopping baskets – Everyday items like soaps, snacks, and packaged food cost less.
Big-ticket savings – Cars, ACs, and TVs become more affordable, especially for first-time buyers.
Financial relief – Lower insurance premiums ease monthly household budgets.
For businesses, especially small and medium enterprises, the simpler tax structure reduces compliance headaches, making it easier to operate.
