What is new GST on motorcycles, ACs and TVs to when will the changes come into force: All FAQs answered

Union Finance Minister Nirmala Sitharaman on September 3, announced that the GST Council has approved a new simplified tax structure with two main rates—5% and 18%—along with a special 40% tax on luxury and sin goods. This major reform, described as a "Diwali gift for the nation," will take effect from September 22, 2025, with specific conditions for tobacco products. A follow-up GST Council meeting is scheduled for September 4.

Following the announcement, Prime Minister Narendra Modi highlighted that these next-gen GST reforms aim to simplify business for small traders and enhance the ease of living for the public. He said the changes were carefully planned to rationalise GST rates and streamline processes. Praising the cooperative effort between the Centre and states, Modi stated that the reforms will benefit a wide range of citizens, including farmers, MSMEs, women, youth, and the middle class, contributing to a stronger, more self-reliant India.

FAQs on new GST reforms

1. When will the changes in GST rates come into force?

As per recommendations of the GST Council in its 56th meeting, the changes in GST rates on services and goods other than cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and beedi will be effective from 22nd September, 2025. For the specified goods namely, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and beedi, the existing rates of GST and compensation cess will continue to apply and the new rates will be implemented at a later date to be notified, based on discharging of entire loan and interest liabilities on account of compensation cess.

2. UHT (Ultra High Temperature) milk has been exempted. Does exemption to UHT milk also cover plant-based milk?

All dairy milk, other than UHT milk, were already exempt from GST. Hence UHT milk has been exempted to provide same tax treatment to similar goods. Plant based milk drinks except soya milk drinks attracted 18% GST while soya milk drink attracted 12% GST. The GST rate on plant-based milk drinks and soya milk drinks have now been reduced to 5%.

3. What is the reason for 40% rate on ‘other non-alcoholic beverages’?

The principle behind the recent rate rationalisation exercise is to keep similar goods at the same rate to avoid issues of misclassification and disputes. This has also been applied to ‘other nonalcoholic beverages’.

4. Why is there a different tax treatment between paneer and other cheese?

Prior to rate rationalisation, paneer sold in other than pre-packaged and labelled form already attracted nil rate. Therefore the changes have been made only in respect of paneer supplied in pre-packaged and labelled form. Paneer is an Indian cottage cheese. This is mostly produced in small scale sector. The measure is intended to promote Indian cottage cheese.

5. What is the GST rate on medicines? Does the 5% GST rate apply on all medical devices?

All drugs/ medicines have been prescribed a concessional rate of GST of 5%, except those specified at nil rate. The rate of 5% applies on all medical devices, instruments, apparatus used in medical, surgical, dental and veterinary uses other than that are exempted specifically.

6. What is the revised GST rate on small petrol, LPG, CNG, or diesel cars? What is covered under small cars?

The GST rate on all small cars has been reduced from 28% to 18%. For the purposes of GST, small cars means Petrol, LPG, or CNG cars with engine capacity up to 1200 cc and length up to 4000 mm and Diesel cars with engine capacity up to 1500 cc and length up to 4000 mm.

7. What is the GST rate on 3-wheelers? What is the GST rate on vehicles supplied as ambulances?

The GST rate on three-wheelers classified under HSN 8703 is 18%. It has been reduced from 28%. Motor vehicles cleared as ambulances, and duly fitted with all necessary fitments, furniture, and accessories necessary for an ambulance at the time of clearance from the factory will attract a GST rate of 18%. It has been reduced from 28%.

8. What is the GST rate on motorcycles? GST rate is 18% for motor cycles upto 350cc? Does this include 350cc motor cycles?

Motorcycles of engine capacity upto 350 cc attract a GST rate of 18% while Motorcycles of engine capacity exceeding 350 cc attract a GST rate of 40%. The 40% rate is applicable only to motorcycles exceeding 350cc. Therefore the 18% rate also applies to motor cycles of 350cc or lesser than 350cc

9. Why has GST not been removed on raw cotton?

Currently, cotton attracts GST on reverse charge basis. This means that agriculturists do not have to pay GST when they supply raw cotton. The reason for taxing cotton in GST is to avoid breakage in input credit chain and the GST paid on cotton is available as input tax credit for the textile industry. This will ultimately benefit the consumers.

10. What is the GST rate on Air Conditioners, TVs, monitors and dishwashers?

GST on air conditioners and dishwashers has been reduced from 28% to 18%. Earlier TVs and monitors up to 32 inches earlier attracted 18% GST while larger TVs and monitors attracted 28% GST. Now all TVs and monitors will be uniformly taxed at 18%.