New Delhi : GST 2.0 tax changes come into force from September 22, 2025, bringing a big reshuffle of tax rates across goods and services. The government expects GST 2.0 to reduce compliance challenges, cut disputes, and make goods and services cheaper for households. However, the real question for consumers is whether companies will pass on the benefits of tax cuts to them.
On Sunday evening, Prime Minister Narendra Modi described the reform as the start of a “Bachat Utsav” or festival of savings, promising households that they would see lower prices on daily items. The announcement followed the 56th GST Council meeting chaired by Union Finance Minister Nirmala Sitharaman. The earlier four-tier structure of 5%, 12%, 18% and 28% created confusion, particularly in the classification of goods. GST 2.0 simplifies this to two broad slabs:
5% for essentials and daily-use goods such as food grains, medicines, basic dairy items and educational products.
18% for most standard goods and services, including manufacturing, transport and consumer services.
A 40% rate will now apply to sin and luxury goods such as tobacco, pan masala, aerated drinks, premium vehicles, gambling, casinos, online gaming, and race clubs.
The Union Finance Ministry notified the revised Central GST (CGST) rates last week, and states are issuing their respective State GST (SGST) notifications to bring them into effect from today.
WHAT GETS CHEAP
Many essential and consumer-focused items will now attract lower taxes.
Food and dairy: UHT milk, chapati, paratha, and parotta will be tax-free. Products like butter, ghee, paneer and cheese will move to 5%. Packaged foods like pasta, biscuits, chocolates, cornflakes, namkeens and bhujia will also be taxed at 5%.
Dry fruits and sugar products: Almonds, cashews, pistachios and dates, earlier taxed at 12%, will now attract 5%. Refined sugar and confectionery will also move to the 5% bracket.
Healthcare and education: Life-saving drugs, medical devices, and books will either be tax-free or taxed at 5%.
Consumer durables: Washing machines, dishwashers and televisions shift from 28% to 18%. Hair oil, shampoos, toothpaste and dental floss will move to 5%.
Automobiles: Small cars and bikes with engines up to 350cc will be taxed at 18% instead of 28%. Insurance policies on life and health will now be tax-free.
Housing and construction: Fertilisers, seeds, crop inputs and construction materials will move from 12% to 5%.
Services: Hotel tariffs under Rs 7,500 will now attract 5% instead of 12%. Economy air tickets will also be taxed at 5%.
Certain products will see higher taxes:
Luxury and sin goods: Cigarettes, gutkha, zarda, pan masala and aerated waters with added sugar will now be taxed at 40%.
Coal: Moved up from 5% to 18%, raising costs for coal-based industries.
Large bikes and cars: Bikes above 350cc and luxury cars will attract 40%.
Leisure and gaming: Casino, horse racing, lottery, and IPL tickets will also come under the 40% bracket.
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