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 7:10 AM IST
Reduction in rates welcome, but too late: Chidambaram
Former finance minister P Chidambaram said the reduction in rates on a range of goods and services was welcome but too late.
The GST rationalisation and the reduction in rates on a range of goods and services are WELCOME but 8 years TOO LATE
— P. Chidambaram (@PChidambaram_IN) September 3, 2025
The current design of GST and the rates prevailing until today ought not to have been introduced in the first place
We have been crying hoarse for the last 8… - 4 Sept 2025 7:03 AM IST
GST reforms to provide relief to families, ease compliance for businesses: India Inc
India Inc on Thursday hailed the GST Council's "forward-looking decisions" -- moving to two rates of 5 per cent and 18 per cent from 22 September, simplifying refunds and MSME procedures, and exempting individual life and health insurance from the indirect tax regime.
Industry bodies said the clarity will ease compliance, reduce litigation, and give businesses and consumers much-needed predictability.
The GST Council on Wednesday approved a two-tier rate structure of 5 and 18 per cent, which will be implemented from September 22.
CII Director General Chandrajit Banerjee said, "This move on GST reforms is a phenomenal milestone. By lowering rates on everyday items and critical inputs, the reforms provide immediate relief to families and strengthen the foundation for growth".
Hemant Jain, President, PHDCCI stated: "The roll-out of GST rate rationalisation from September 22, 2025, is a landmark reform that addresses both consumer welfare and revenue efficiency. By reducing rates on daily essentials such as toiletries, packaged foods, and utensils from 18-12% to 5%, the reform will ease household budgets and stimulate demand".
"We thank and welcome the rectification of the GST inversion in the Man-Made Fibre (MMF) value chain by aligning MMF fibre and yarn at 5 per cent from 18 per cent and 12 per cent earlier respectively. It addresses the long-standing blockage of working capital for thousands of spinners and weavers," Confederation of Indian Textile Industry (CITI) Chairman Rakesh Mehra said.
- 4 Sept 2025 12:03 AM IST
GTS reforms will directly benefit farmers, MSMEs, says Odisha CM
Odisha Chief Minister Mohan Charan Majhi on Wednesday said the GST Council approvals and reforms will directly benefit farmers, MSMEs, small traders and middle-class families.
Majhi said this while attending the 56th GST Council meeting in New Delhi, chaired by Union Finance Minister Nirmala Sitharaman.
"The Council approved relief in GST on life & health insurance, agri-inputs, farm machinery and life-saving medicines, along with rationalisation to support tribal livelihoods. These reforms will directly benefit farmers, MSMEs, small traders and middle-class families," Majhi said.
Stating that the reforms place citizens at the core, ensuring ease of living, ease of doing business and accelerating India's progress towards becoming a Developed Nation by 2047, Majhi said: "The rate rationalisation proposal of the Group of Ministers is a welcome move that will benefit the common man and will ease compliance, lower business costs, and make India's tax system simpler and more efficient."
"This will make insurance more accessible for middle‑ and lower-income groups and improve insurance penetration in India," he said.
On the various proposals deliberated by the Group of Ministers regarding Compensation Cess, the Odisha Chief Minister said he welcomes the merger of items which are currently subject to compensation cess in the GST framework.
"Surplus in the compensation cess account may be shared between the Centre and States in the ratio of 50:50. Among states, it may be distributed based on each state's share of GST revenue calculated on the base year formula," he said.
- 3 Sept 2025 11:39 PM IST
Apex exporters' body FIEO welcomes GST reforms
Hailing the decisions of the GST Council, apex exporters' body FIEO on Wednesday said the commitment to process refunds within seven days is a step in the right direction and will greatly ease liquidity stress on exporters.
Federation of Indian Export Organisations (FIEO) said that timely and predictable refunds are critical to maintaining India's export competitiveness, particularly at a time when global demand remains uncertain.
"We look forward to continued collaboration with the government in ensuring smooth execution of these measures on the ground," FIEO Director General Ajay Sahai said in a statement.
Allowing GST refund below Rs 1,000 will benefit e-commerce exporters largely, he said.
"GST announcements on exports refund is a very welcome move by the GST Council and will provide much-needed relief to exporters. The commitment to process refunds within seven days, and the facilitation through ICEGATE for small taxpayers, is a step in the right direction and will greatly ease liquidity stress on exporters," he added
- 3 Sept 2025 11:29 PM IST
Watch | A quick analysis of the GST reforms
From September 22, the GST Council’s two-tier tax regime kicks in, directly affecting car prices, electronics, packaged foods and services. The move aims to simplify compliance but also changes what consumers will pay on essentials and luxury goods. Businesses must brace for recalibration as households track costs closely.
Watch The Federal's Vijay Srinivas in conversation with Business Editor Prasanna Mohanty.
- 3 Sept 2025 11:18 PM IST
This reform will bring ease of living, says Rajnath Singh
What Rajnath Singh said: ''The Government of India, under the leadership of PM Narendra Modi, has announced the Next-Gen GST reforms to bring relief across sectors. With tax rates reduced on many important items, this reform will bring ease of living, further strengthen ease of doing business, empower small businesses, and boost India’s self-reliance under Aatmanirbhar Bharat. I thank PM Modi and the FM Smt. Nirmala Sitharaman for taking this bold decision."
Defence Minister Rajnath Singh tweets, "The Government of India, under the leadership of PM Narendra Modi, has announced the Next-Gen GST reforms to bring relief across sectors. With tax rates reduced on many important items, this reform will bring ease of living, further… pic.twitter.com/kXcQGm0XPG
— ANI (@ANI) September 3, 2025 - 3 Sept 2025 10:55 PM IST
GST 2.0: Arvind Shrivastava clarifies on footwear slabs
Arvind Shrivastava, Secretary, Department of Revenue, Ministry of Finance, says, "As far as footwear is concerned, there were two rates in the past. Those costing less than Rs 1000 were charged 12% and those costing more than Rs 1000 were charged 18%. Now, Footwear costing less than Rs 2500 will be charged at 5% percent and those costing more than Rs 2500 at 18%."
- 3 Sept 2025 10:45 PM IST
GST Live: List of sin goods under 40 pc slab
Paan masala
Cigarettes
Gutka, zarda
Unmanufactured tobacco
Beedi
Aerated, sugary drinks
Carbonated beverages
Non-alcoholic beverages
Mid, large cars
Bikes over 300 cc
Personal use aircraft/helicopter
Yatch
- 3 Sept 2025 10:35 PM IST
Goods that will attract 40% GST
Goods which will attract 40% GST
Special rate of 40% will apply only to pan masala, cigarettes, gutka, and other tobacco products. Caffeinated beverages and carbonated beverages will be in 40%.
