Centre rolls out new GST regime: Only 5 pc and 18 pc slabs from Sep 22
Almost all personal-use items will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs
From hair oil, milk products, and corn flakes to TVs, and personal health and life insurance policies, GST tax rates on common-use items were slashed after the all-powerful GST Council on Wednesday (September 3) approved a complete overhaul of the tangled Goods and Services Tax (GST) regime.
The GST Council approved a rate overhaul by limiting slabs to 5 per cent and 18 per cent, effective from September 22, the first day of Navaratri.
Almost all personal-use items will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs.
Also Read: Centre rolls out new GST regime: Only 5 pc and 18 pc slabs from Sep 22
Only two slabs now
Briefing reporters after a marathon daylong GST Council meeting, Union Finance Minister Nirmala Sitharaman said all decisions were taken unanimously, with no disagreement with any state.
The panel approved simplifying the goods and services tax (GST) from the current four slabs – 5, 12, 18 and 28 per cent – to a two-rate structure -- 5 and 18 per cent. A special 40 per cent slab is also proposed for a select few items such as high-end cars, tobacco and cigarettes.
The new rates for all products, except gutkha, tobacco and tobacco products and cigarettes, will be effective September 22 -- the first day of Navratri, she said.
Also Read: Diwali comes early: Council slashes GST on everyday items; here is the full list
What will get cheaper?
While daily use food items will continue to attract nil tax rate, common use food and beverages ranging from butter and ghee to dry nuts, condensed milk, sausages and meat, sugar boiled confectionery, jam and fruit jellies, tender coconut water, namkeen, drinking water packed in 20-litre bottles, fruit pulp or fruit juice, beverages containing milk, ice cream, pastry and biscuits, corn flakes and cereals, and sugar confectionery are likely to see a cut in tax rate to 5 per cent from the current 18 per cent.
All forms of chapati and paratha will be charged nil tax, down from the current rate of 5 per cent.
Consumer goods such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see rate cut from 12 per cent to 5 per cent. The rates on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil has been cut down to 5 per cent from 18 per cent.
Sitharaman said all individual life and health insurance policies will now attract nil tax in a bid to boost coverage.
Cement will cost less with the tax rate coming down from 28 per cent to 18 per cent. Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length, too, would move to 18 per cent rate from 28 per cent.
Also Read: Mega GST reforms fuel stock markets rally; Sensex jumps nearly 900 points
Reforms in auto sector
All cars larger than 1,200 cc for petrol and 1,500 cc for diesel will be charged at 40 pc, the finance minister said.
Motorcycles up to 350 cc, consumer electronics like air-conditioners, dishwashers, and TVs, too, will be taxed at lower GST of 18 per cent as against 28 per cent currently.
All automobiles above 1,200 cc and longer than 4,000 mm as well as motorcycles above 350 cc, yachts and aircrafts for personal use, and racing cars will be attract a 40 per cent levy.
EVs will continue to be charged at 5 per cent GST.
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Live Updates
- 4 Sept 2025 10:18 AM IST
Next Gen GST reforms are Modi's gift for the coming festival season: Ashwini Vaishnaw
"Historic Next-Gen GST Reforms...PM Narendra Modi’s gift for the coming festival season - cutting costs, easing lives, and powering Aatmanirbhar Bharat," Union Minister Ashwini Vaishnaw tweeted on X.
- 4 Sept 2025 10:13 AM IST
The GST reforms will have a huge impact on the transformation of India: EAM Jaishankar
"Delivering on PM Narendra Modi’s Independence Day announcement, the GST Council's decision to adopt the Next Gen GST reforms will have huge impact on the transformation story underway in India and the Government’s effort to improve ease of living & doing business," External Affairs Minister, S Jaishankar, said in a post on X.
- 4 Sept 2025 10:07 AM IST
The GST reforms are a 'historic step in Bharat’s economic journey': Bhupendra Patel
"This reform fulfils the promise made by Hon’ble PM in his Independence Day address — to bring #NextGenGST that eases the lives of citizens and strengthens the economy. This landmark reform will benefit crores of middle-class families, farmers, small traders and entrepreneurs, while giving fresh momentum to Bharat’s growth journey," Gujarat CM Bhupendra Patel said in a post on X.
- 4 Sept 2025 9:53 AM IST
Govt has finally adhered to demands of 'rationalising' & 'simplifying' GST: Priyank Kharge
"For almost a decade, the Indian National Congress has been demanding simplification of GST. “One Nation, One Tax” had become “One Nation, 9 Taxes” — 0%, 5%, 12%, 18%, 28%, and special rates of 0.25%, 1.5%, 3% and 6%. Now that, the Govt has finally adhered to our demands of RATIONALISING & SIMPLIFYING the GST, they are yet to figure out how they will compensate the losses to states like Karnataka," Congress leader and Karnataka cabinet minister, Priyank Kharge said in a post on X.
- 4 Sept 2025 9:46 AM IST
GST Council meet is reduced to a formality: Jairam Ramesh
"The Union Finance Minister has made major announcements last evening after the meeting of the GST Council, which is a constitutional body. However, even before the GST Council meeting, the Prime Minister had already proclaimed the substance of its decisions in his Independence Day speech of August 15th, 2025. Is the GST Council to be reduced to a formality?" Congress general secretary, Jairam Ramesh said in a post on X.
- 4 Sept 2025 9:27 AM IST
Cong terms GST overhaul 'GST 1.5'; says wait for 'true GST 2.0' continues
With the GST Council approving a complete overhaul of the Goods and Services Tax (GST) regime, the Congress on Thursday termed it a "GST 1.5" and said time alone will tell whether it would stimulate private investment as well as ease the burden on MSMEs.
The opposition party asserted that the wait for a "true GST 2.0" continues.
Congress general secretary in-charge communications Jairam Ramesh said that a key demand of the states made in the true spirit of cooperative federalism ' namely, the extension of compensation for another five years to fully protect their revenues' remains unaddressed.
In fact, that demand assumes even greater importance now, he said.
The Indian National Congress has for long been advocating for a GST 2.0 that reduces the number of rates, cuts the rates on a large number of items of mass consumption, minimises evasion, mis-classification, and disputes, does away with inverted duty structure ' lower tax on output as compared to inputs ' eases the compliance burden on MSMEs, and expands GST coverage, Ramesh said on X.
He noted that Union Finance Minister Nirmala Sitharaman has made major announcements last evening after the meeting of the GST Council, which is a constitutional body.
"However, even before the GST Council meeting, the Prime Minister had already proclaimed the substance of its decisions in his Independence Day speech of August 15th, 2025. Is the GST Council to be reduced to a formality?" Ramesh said.
"Faced with a lack of buoyancy in private consumption, subdued rates of private investment, and endless classification disputes, the Union Finance Minister has finally recognised that GST 1.0 had reached a dead end. In fact, the very design of GST 1.0 was flawed and this had been pointed out by the INC way back in July 2017 itself, when the PM had made one of his typical U turns and decided to introduce GST," he said.
It was meant to be a Good and Simple Tax. It turned out to be a Growth Supressing Tax, Ramesh said.
- 4 Sept 2025 9:02 AM IST
Harsh Goenka lauds GST reforms
Industrialist Harsh Goenka said the GST reforms would lead to ease of living and give a boost to the economy.
Big Diwali gift 🎁 for every Indian!
— Harsh Goenka (@hvgoenka) September 3, 2025
GST on daily essentials, healthcare, education & farming inputs slashed.
🛒 Cheaper groceries
💊 Relief in healthcare
📚 Affordable education
🚜 Support for farmers
Next-gen GST = ease of living + boost to economy. - 4 Sept 2025 8:23 AM IST
Hardeep Puri praises GST reforms, says they will create growth-oriented tax system
Union Minister Hardeep Puri has lauded the GST reforms, stating that they focus on creating a stable, transparent and growth-oriented tax system that will benefit farmers, the middle class, MSMEs and businesses.
As announced by PM Sh @narendramodi Ji on Independence Day, the Next-Gen GST reforms aim to simplify compliance and improve the ease of living for citizens. These reforms focus on creating a stable, transparent, and growth-oriented tax system that will benefit farmers, the middle… pic.twitter.com/faQKDQT3SF
— Hardeep Singh Puri (@HardeepSPuri) September 4, 2025 - 4 Sept 2025 8:06 AM IST
Victory wrested from regime that only listens when forced: TMC
The Trinamool Congress has termed the Centre’s decision to exempt life insurance and health insurance from GST a victory for common people, which it claimed was “wrested from a tone-deaf regime that only listens when forced”.
Announcing the outcome of the 56th GST Council meeting, Finance Minister Nirmala Sitharaman on Wednesday evening said that all individual life insurance policies whether term life, ULIP or endowment policies and subsequent reinsurance are exempt from GST.
“A victory for common people. A victory wrested from a tone-deaf regime that only listens when forced. From day one, Smt.@MamataOfficial warned the Finance Minister that taxing insurance premiums was cruel, anti-people, and would deter families from securing their future, leaving them vulnerable to financial ruin in times of crisis,” the Mamata Banerjee-led party said in a post on X.
The ruling party in West Bengal also claimed that the Narendra Modi government “finally buckled under pressure”.
“This rollback proves that @BJP4India only acts when cornered. We will continue to fight every such Jono-Birodhi (anti-people) decision, in Parliament, on the streets, among the people,” it added.
- 4 Sept 2025 7:33 AM IST
GST reforms defining moment in journey towards more inclusive tax system: Mahindra Group CEO
The next-generation GST reforms mark a defining moment in India's journey towards building a simpler, fairer, and more inclusive tax system, Mahindra Group CEO & MD Anish Shah said on Wednesday.
Reacting to the GST Council's decision to overhaul the tangled Goods and Services Tax (GST), Shah said the Mahindra group views these reforms as transformative as it simplifies compliance, expands affordability, and energises consumption, while enabling industry to invest with greater confidence.
"The next-generation GST reforms announced today mark a defining moment in India's journey towards building a simpler, fairer, and more inclusive tax system," he said in a statement.
Shah further said by moving to a streamlined two-rate structure and focusing on essentials that touch the lives of every citizen- from food, health, and insurance to agriculture and small businesses - the government has "reaffirmed its commitment to ease of living and ease of doing business".
