New GST Rates From September 22: In a major relief for the masses, Finance Minister Nirmala Sitharaman on Wednesday evening approved a significant rationalisation
of GST rates by merging the earlier multiple slabs into just two slabs of 5% and 18%. The GST 2.0 will take effect on September 22. The choice of September 22, 2025, for the latest GST rate revamp is timed to stimulate consumer spending during India's upcoming festive season, which begins with Navratri. The government’s choice of September 22 for the rollout of the new GST rates is no coincidence. While no official reason has been cited, the timing appears carefully calibrated to deliver maximum economic and political impact. GST Council Meeting LIVE Updates Festive season boost: The launch coincides with the start of Navratri, considered an auspicious time for big-ticket purchases. By slashing taxes on essentials, consumer goods and durables just as the festive shopping season kicks off with Durga Puja, Diwali, and Chhath, the government hopes to trigger a surge in demand and give households a feel-good factor. Economic stimulus: The rate cuts are designed to act as a broad consumption booster. Lower taxes on food, personal care products, insurance, and affordable cars are expected to put more money in the hands of consumers, pushing retail demand and lending momentum to the economy. Counter to US tariffs: The GST revamp also comes against the backdrop of Washington’s 50% tariff hike on Indian goods. By easing domestic taxes, the government aims to make ‘Made in India’ products more competitive, offsetting some of the export pain through stronger local demand.
Biggest GST Reforms - Key Takeaways
The GST Council has approved the biggest overhaul of the tax regime since its launch, slashing rates on daily essentials and insurance premiums while simplifying the slab structure.
Two-Slab Structure From September 22
Starting September 22, the first day of Navaratri, GST will move from the current four-tier system (5%, 12%, 18% and 28%) to just two slabs: 5% and 18%. A special 40% slab has been carved out for sin and luxury goods such as tobacco, pan masala, gutkha, cigarettes, high-end cars, and sugary drinks.
What Gets Cheaper
- Food essentials: Roti, paratha, paneer, butter, ghee, cheese, dry fruits, cereals, jams, fruit juices, confectionery, namkeen, pastry, biscuits, ice cream, cornflakes and more.
- Daily-use goods: Toothpaste, toothbrushes, soaps, shampoos, talcum powder, hair oil, tooth powder, face powder — all down from 18% to 5%.
- School items: Erasers, exercise books, maps, sharpeners now at 0% tax.
- Consumer goods: Bicycles, feeding bottles, kitchenware, tableware, umbrellas, bamboo furniture, combs now at 5% instead of 12%.
- Insurance: All life and health insurance policies will now attract 0% GST, cutting premium costs significantly.
- Vehicles & electronics: Small petrol/diesel cars, motorcycles up to 350cc, TVs, ACs, and dishwashers drop to 18% from 28%.
- Construction: Cement moves down from 28% to 18%.
- EVs: Continue at just 5%.
What Gets Costlier
- Luxury cars, SUVs, racing cars, yachts, aircraft for personal use: 40% GST.
- Tobacco and related products: 40% slab, though current cess structure continues until dues are cleared.
- Aerated drinks with added sugar: 40% GST.
Fiscal Impact
The rate rationalisation will cost around Rs 48,000 crore, but the government says it is fiscally sustainable and will boost consumption at home, helping cushion the blow of US tariffs on Indian exports.
Revenue Secretary Arvind Shrivastava said the move would significantly ease household budgets and lower insurance costs, while still keeping “sin goods” heavily taxed.
