Nirmala Seetharaman Photo Credit: PTI
The Goods and Services Tax (GST) Council has approved the biggest overhaul of the tax system since its rollout in 2017. The council has cut down the four existing slabs of 5%, 12%, 18% and 28% to a simplified structure of 5% and 18%.
A special 40% slab will apply only to sin and luxury items like high-end cars, soft drinks, and tobacco products. The new rates, except for pan masala, gutkha, and cigarettes, will take effect from September 22, 2025.
Household essentials, including shampoo, soap, toothpaste, and hair oil will be imposed with only 5% tax instead of 18%. Tooth powder, feeding bottles, kitchenware, umbrellas, bicycles, and bamboo furniture will also move to the 5% slab.
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Basic foods are set to become cheaper too. Items like chapatis, paneer, pizza bread, and khakra will attract no tax. Butter, ghee, jams, biscuits, ice cream, cereals, and fruit juices will see tax reduced to 5% from 18%.
Plant-based milk and soya drinks will also fall under 5%.
Healthcare is another major beneficiary, with life-saving drugs, thermometers, oxygen, and corrective spectacles moving to 5% or nil tax. Insurance policies-both life and health-will be exempted from GST.
Cement will now attract 18% instead of 28%. Motorcycles up to 350cc, small hybrid cars, and auto components will also see lower rates. Consumer electronics such as ACs, TVs, and dishwashers will move to 18% from the earlier 28%.
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Carbonated and sugary drinks, including popular soft drink brands, will now attract 40% GST. The same rate will apply to caffeinated beverages, luxury cars above 1,200cc, racing cars, yachts, and aircraft for personal use.
Tobacco products will also move to the 40% slab once compensation cess obligations are over. Casinos, online gaming, horse racing, and IPL tickets will be taxed at 40%.
