New Delhi, September 3, 2025: The GST Council, in its 56th meeting chaired by Finance Minister Nirmala Sitharaman, approved a landmark overhaul of the Goods and Services Tax (GST) structure, reducing the four main slabs (5%, 12%, 18%, 28%) to two slabs of 5% and 18%, effective from September 22, 2025, the start of Navratri. A special 40% slab will apply to “sin goods” like tobacco and luxury items, while cigarettes and similar items retain 28% plus compensation cess until loan repayments are cleared.
The reforms aim to boost consumption ahead of the festive season, address inverted duty structures in textiles and fertilizers, ease MSME compliance, and counter export challenges from US tariffs. Sitharaman emphasized that the changes prioritize the “common man and middle class.” GST on individual life and health insurance policies (term, ULIP, endowment, family floaters, senior citizens) and reinsurance is now exempt (0%), enhancing affordability.
“This is a simpler, growth-oriented GST reform,” Sitharaman said. “We’ve corrected inversions, removed disputes, and ensured economic momentum with state support.”
Key Changes: What’s Cheaper and What’s Costlier Nearly 99% of items in the 12% slab move to 5%, and 90% in the 28% slab shift to 18%. Essentials like paneer, Indian breads (roti, paratha), and namkeens are now at 0% or 5%, while luxury goods like large cars and tobacco face 40%. Below is a table of major rate changes (sourced from the Ministry of Finance):
GST Rate Changes Table
| Description | From (%) | To (%) |
|---|---|---|
| Condensed milk | 12 | 5 |
| Butter, ghee, oil | 12 | 5 |
| Cheese | 12 | 5 |
| Paneer or chenna | 5 | 0 |
| Dates | 12 | 5 |
| Fish and caviar, prepared and preserved | 12 | 5 |
| Shrimps and prawns, prepared and preserved | 12 | 5 |
| Refined sugar (flavored/colored), sugar cubes | 12 | 5 |
| Confectionery | 18 | 5 |
| Cocoa powder | 18 | 5 |
| Chocolates and other food preparations | 18 | 5 |
| Pasta | 12 | 5 |
| Pastry, cakes, biscuits, bread | 18 | 5 |
| Pizza bread | 5 | 0 |
| Khakhra, chapathi, roti | 5 | 0 |
| Jams and fruit jellies | 12 | 5 |
| Tender coconut water | 12 | 5 |
| Coffee extracts | 18 | 5 |
| Coffee | 12 | 5 |
| Mustard, mayonnaise | 12 | 5 |
| Soups and broth | 18 | 5 |
| Ice cream | 18 | 5 |
| Paratha, parotta, other Indian breads | 18 | 0 |
| Namkeens | 12 | 5 |
| Pan masala | 28 | 40 |
| Diabetic foods | 12 | 5 |
| Drinking water | 12 | 5 |
| Mineral/aerated waters | 18 | 5 |
| Aerated beverages with sugar | 28 | 40 |
| Non-alcoholic beverages | 18 | 40 |
| Plant-based milk | 18 | 5 |
| Soya milk drinks | 12 | 5 |
| Fruit juice | 12 | 5 |
| Carbonated beverages with fruit juice | 28 | 40 |
| Beverages containing milk | 12 | 5 |
| Caffeinated beverages | 28 | 40 |
| Cigars and cigarettes | 28 | 40 |
| Bidis | 28 | 18 |
| Tobacco | 28 | 40 |
| Retail medicines | 12 | 5 |
| Bandages, dressing | 12 | 5 |
| Talcum powder, face powder | 18 | 5 |
| Hair oil, shampoo | 18 | 5 |
| Dental floss, toothpaste | 18 | 5 |
| Tooth powder | 12 | 5 |
| Shaving cream, lotion, aftershave | 18 | 5 |
| Agarbatti | 12 | 18 |
| Toilet soap | 18 | 5 |
| Candles, tapers | 12 | 5 |
| Handcrafted candles | 12 | 5 |
| Silicon wafers | 12 | 5 |
| All diagnostic kits | 12 | 5 |
| Tyre for tractors | 18 | 5 |
| Handbags | 12 | 5 |
| Wood, stone idols | 12 | 5 |
| Handicraft | 12 | 5 |
| Exercise books, graph books, notebooks | 12 | 0 |
| Maps | 12 | 0 |
| Carpets | 12 | 5 |
| Handmade/hand embroidered shawls | 12 | 5 |
| Apparel over Rs 2,500 | 12 | 18 |
| Footwear less than Rs 2,500 per pair | 12 | 5 |
| Umbrellas | 12 | 5 |
| Mathematical/geometry/colour boxes | 12 | 5 |
| Wind mills | 12 | 5 |
| PV cells | 12 | 5 |
| ACs | 28 | 18 |
| Solar water heater | 12 | 5 |
| Dishwashing machines | 28 | 18 |
| TVs | 28 | 18 |
| Motor cars (other) | 28 | 40 |
| Petrol cars (≤1200cc, ≤4000mm) | 28 | 18 |
| Diesel cars (≤1500cc, ≤4000mm) | 28 | 18 |
| Ambulances | 28 | 18 |
| Three-wheeled vehicles | 28 | 18 |
| Hybrids (≤1200cc, ≤4000mm) | 28 | 18 |
| Hybrids (>1200cc or >4000mm) | 28 | 40 |
| Bodies for motor vehicles | 28 | 18 |
| Parts and accessories (auto) | 28 | 18 |
| Bumpers and parts for tractors | 18 | 5 |
| Motorcycles (≤350cc) | 28 | 18 |
| Motorcycles (>350cc) | 28 | 40 |
| Bicycles, non-motorized | 12 | 5 |
| Yachts, vessels for pleasure/sports | 28 | 40 |
| Glucometer and test strips | 12 | 5 |
| Contact lenses, spectacle lenses | 12 | 5 |
| Spectacle frames, mountings | 12 | 5 |
| Spectacles, corrective | 12 | 5 |
| Thermometers | 18 | 5 |
| Revolvers and pistols | 28 | 40 |
| Pencils, crayons | 12 | 0 |
| Smoking pipes | 28 | 40 |
| Combs, hair pins | 12 | 5 |
Additional Notes:
- Exemptions: GST on 33 life-saving drugs reduced to 0% from 12%; 3 cancer/rare disease drugs to 0% from 5%; several drugs to 5% from 12%. All individual life/health insurance policies (term, ULIP, endowment, family floaters, senior citizens) and reinsurance now 0% from 18%.
- Agriculture and Handicrafts: Tractors, agricultural machinery, 12 bio-pesticides, natural menthol, handicrafts, marble/granite blocks to 5% from 12%. Cement to 18% from 28%.
- Textiles and Fertilizers: Man-made fibre to 5% from 18%, yarn to 5% from 12% (textile inversion fix). Sulfuric/nitric acid, ammonia to 5% from 18% (fertilizer fix).
- Renewable Energy: Biogas plants, windmills, PV cells, solar heaters to 5% from 12%.
- Tobacco: Retains 28% plus cess until loan repayment; transition to 40% to be set by FM.
Broader Impacts The reforms introduce pre-filled returns, automated refunds, and simplified registration for MSMEs. The end of compensation cess by March 2026 frees fiscal space, though states like Jammu & Kashmir flagged revenue concerns. Experts estimate a ₹5.31 lakh crore (1.6% GDP) consumption boost, countering export risks from US tariffs. The second meeting day on September 4 will finalize transition details.
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