The Goods and Services Tax (GST) Council has approved sweeping reforms to the indirect tax system by slashing GST rates for a wide range of goods and services. From September 22, 2025, coinciding with the start of Navaratri, India will adopt a simplified two-slab GST system of 5% and 18%, replacing the existing four-tier structure of 5%, 12%, 18% and 28%.
Everyday essentials such as roti, paratha, pizza bread, UHT milk, paneer, shampoos, soap bars, bicycles, small cars, TVs, ice creams, and face powder will now become cheaper, while health and life insurance policies are set to be exempt from GST. Meanwhile, luxury and “sin” goods such as tobacco, pan masala, gutkha, and large cars will continue to face a special 40% GST bracket.
Finance Minister Nirmala Sitharaman confirmed that the decisions were unanimously supported by all states. The move aims to stimulate consumption, simplify compliance, and neutralize the impact of U.S. tariffs on domestic industries.
A total of 75 FAQs have been released by the government, clarifying GST changes on items ranging from food products, medicines, agricultural machinery, renewable energy equipment, automobiles, and passenger services, to job work and sporting events.
Key highlights include:
- Exemption of essential foods: Chapati, roti, paneer, UHT milk, khakra, and more.
- Major relief for households: Reduced GST on soaps, shampoos, face powder, bicycles, small cars, TVs, and ACs.
- Support for healthcare: Reduced GST on medical devices, concessional 5% on most medicines.
- Boost to agriculture and renewable energy: Reduced GST on agri-machinery and solar equipment.
- Transport sector relief: Lower GST on three-wheelers, trucks, buses, and ambulances.
- Luxury & sin goods taxed higher: 40% GST on tobacco, big cars, betting, casinos, and IPL tickets.
The government’s objective is to simplify taxation, reduce burden on consumers, promote domestic manufacturing, and ensure refunds for inverted duty structures are processed efficiently.