The GST Council has announced big cuts in the daily purchase segment to provide relief to the middle class, to revive consumption prior to the upcoming festive season, to cushion the impact of US tariffs. Prime Minister Narendra Modi on Wednesday hailed the reforms of the GST Council saying they would improve the lives of all and ensure the ease of doing business for all. The major move hailed by many is moving the packaged staples, personal care items and household and kitchen goods from the 18 per cent and 12 per cent slabs to the 5 per cent slab. GST on all individual health and life insurance policies were exempted.&nbsp;

<blockquote class="twitter-tweet">During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST. The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and…&mdash; Narendra Modi (@narendramodi) <a href="https://twitter.com/narendramodi/status/1963285580940546131?ref_src=twsrc%5Etfw">September 3, 2025</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

<h2>Items in the 5 per cent slab</h2>Everyday household goods like toothpaste, soap, shampoo, hair oil, detergent, dishwashing liquid, clothing and footwear up to Rs 2,500 per item were included in the 5 per cent slab. Items related to the lifestyle and utility items such as bicycles, kitchenware, tableware (steel, plastic), dairy-related items such as butter, ghee, packaged milk, packed staples such as Namkin, Bhujia, and mixtures were also given the relief. Nirmala Sitharaman also lowered healthcare-related items such as thermometers, medical-grade oxygen, all diagnostic kits, test strips, glucometers from 18 and 12 per cent to 5 per cent. Among services, gyms, fitness centres, beauty parlours, salons and barber shops were included in the 5 per cent segment. &nbsp;&nbsp;<h2>Impact of the relief</h2>The relief was a long-standing demand from the consumer and industry, particularly the MSME sector. Affordable insurance, lower household expenses will allow the middle-class with extra money, likely to return to the market via discretionary and luxury spending. However, the cut is not just festive demand, but also a strategic step to act as a buffer against the US tariffs. The states were also worried about revenue loss, but the centre assured that the compensation through luxury and sin items like cigarettes and tobacco products as well as luxury cars, private jets, yachts, will balance the revenue shortfall. MSME, FMCG and Retailers are welcoming the move. But experts believe, eventhough this will help boost consumption, but will reduce overall revenue.&nbsp;

India's GST Council has announced wholesale changes to the Goods and Services Tax in the daily purchase segment in an attempt to boost consumption for the middle-class prior to the festive season.

The GST Council has announced big cuts in the daily purchase segment to provide relief to the middle class, to revive consumption prior to the upcoming festive season, to cushion the impact of US tariffs. Prime Minister Narendra Modi on Wednesday hailed the reforms of the GST Council saying they would improve the lives of all and ensure the ease of doing business for all. The major move hailed by many is moving the packaged staples, personal care items and household and kitchen goods from the 18 per cent and 12 per cent slabs to the 5 per cent slab. GST on all individual health and life insurance policies were exempted.

India's GST Council has announced wholesale changes to the Goods and Services Tax in the daily purchase segment in an attempt to boost consumption for the middle-class prior to the festive season.

GST rate cuts on common goods: Relief for middle class, push for festive demand

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.<h2>FAQs on new GST reforms</h2><ol><li>When will the changes in GST rates come into force?&nbsp;</li></ol>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.&nbsp;2. UHT (Ultra High Temperature) milk has been exempted. Does exemption to UHT milk also cover plant-based milk?&nbsp;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%.&nbsp;3. What is the reason for 40% rate on ‘other non-alcoholic beverages’?&nbsp;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’.&nbsp;4. Why is there a different tax treatment between paneer and other cheese?&nbsp;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.&nbsp;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.&nbsp;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.&nbsp;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%.&nbsp;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&nbsp;9. Why has GST not been removed on raw cotton?&nbsp;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.&nbsp;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%.&nbsp;

The GST Council has approved new reforms with 5%, 18%, and 40% slabs effective from Sept 22, 2025. UHT milk, medicines, and medical devices see lower rates. GST on small cars, 3-wheelers, ACs, TVs, and motorcycles ≤350cc reduced to 18%.  All FAQs here

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 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%.

The GST Council has approved new reforms with 5%, 18%, and 40% slabs effective from Sept 22, 2025. UHT milk, medicines, and medical devices see lower rates. GST on small cars, 3-wheelers, ACs, TVs, and motorcycles ≤350cc reduced to 18%. &nbsp;All FAQs here

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

India may be gearing up for its biggest reset of the Goods and Services Tax (GST) regime since it was introduced in 2017. In his Independence Day speech on Friday, Prime Minister Narendra Modi promised “next-generation GST reforms”, which he hinted could be rolled out before Diwali 2025. According to reports, the reforms could simplify the tax structure, reduce levies on common goods and services, and ease the burden on households and small businesses. Here are the speculations of what will get cheaper.&nbsp;<h2>What is being planned?</h2>The Centre has reportedly forwarded a three-pillar blueprint for GST reforms to the Group of Ministers (GoM), which will place its recommendations before the GST Council chaired by Union Finance Minister Nirmala Sitharaman. If adopted, the plan could scrap the 12 per cent GST slab entirely and restructure the regime into just three slabs that is 5 per cent, 18 per cent, and 40 per cent (for sin goods like cigarettes and beer).&nbsp;“This Diwali, I am going to make it a double Diwali for you. This Diwali, you fellow countrymen will get a tremendous gift,” Modi said, signalling tax relief ahead of the festive season.<h2>What could become cheaper?</h2><ul><li>Everyday essentials such as groceries, soaps, medicines, and packaged foods</li><li>Bicycles, agricultural equipment, and tractors – with tax rates potentially dropping to 5 per cent</li><li>Consumer durables like TVs, washing machines, and air conditioners – currently taxed at 28 per cent, could fall under the 18 per cent bracket</li><li>Insurance and education services – sectors flagged by brokerages like Jefferies and Nomura as likely beneficiaries</li><li>Items taxed at 12 per cent, including jam, pasta, frozen vegetables, umbrellas, carpets, footwear under ₹1,000, and feeding bottles, may see rates slashed to 5 per cent, giving households direct relief.</li></ul><h2>Why the change now?</h2>The current GST system has four main slabs, that is 5 per cent, 12 per cent, 18 per cent, and 28 per cent, and has long faced criticism for its complexity. Industry bodies have pushed for a simpler regime with fewer slabs and lower rates on essentials.&nbsp;Reports suggest the government aims to boost consumption ahead of the festive season, while also balancing inflation concerns.<h2>The economic impact</h2>Brokerage firm Citi estimates that moving most 12 per cent slab items into the 5 per cent basket could lead to a revenue loss of up to 0.15 per cent of GDP, but would also provide a policy stimulus worth around 0.7 per cent of GDP in FY26.&nbsp;Experts say rationalisation will need to strike a balance between affordability for consumers, inflation control, and revenue neutrality for the government.<h2>What stays expensive?</h2>Not everything will get cheaper. Goods classified as luxury or harmful, such as cigarettes, pan masala, and alcohol, are expected to remain under a higher 40 per cent GST slab. Automobiles and luxury durables could also continue attracting higher taxes.&nbsp;If implemented as indicated, these reforms could be India’s biggest tax reset since GST’s rollout in 2017. They could simplify compliance, reduce costs for households, and spur demand across key sectors, from farming and consumer durables to insurance.&nbsp;However, the proposals are still under discussion, and the final decision lies with the GST Council, which will weigh fiscal risks against the political and economic push for tax relief.&nbsp;For now, the big question remains: Will Diwali 2025 really bring Modi’s promised “double Diwali” for Indian consumers?&nbsp;(With inputs from the agencies)

A proposed blueprint aims to simplify the tax structure, reducing rates on essentials. Potential shifts include abolishing the 12% slab, creating three slabs: 5%, 18%, and 40% for sin goods. Costs for groceries, bicycles, and consumer durables may drop.

India may be gearing up for its biggest reset of the Goods and Services Tax (GST) regime since it was introduced in 2017. In his Independence Day speech on Friday, Prime Minister Narendra Modi promised “next-generation GST reforms”, which he hinted could be rolled out before Diwali 2025. According to reports, the reforms could simplify the tax structure, reduce levies on common goods and services, and ease the burden on households and small businesses. Here are the speculations of what will get cheaper. What is being planned? The Centre has reportedly forwarded a three-pillar blueprint for GST reforms to the Group of Ministers (GoM), which will place its recommendations before the GST Council chaired by Union Finance Minister Nirmala Sitharaman. If adopted, the plan could scrap the 12 per cent GST slab entirely and restructure the regime into just three slabs that is 5 per cent, 18 per cent, and 40 per cent (for sin goods like cigarettes and beer). “This Diwali, I am going to make it a double Diwali for you. This Diwali, you fellow countrymen will get a tremendous gift,” Modi said, signalling tax relief ahead of the festive season. What could become cheaper? Everyday essentials such as groceries, soaps, medicines, and packaged foods Bicycles, agricultural equipment, and tractors – with tax rates potentially dropping to 5 per cent Consumer durables like TVs, washing machines, and air conditioners – currently taxed at 28 per cent, could fall under the 18 per cent bracket Insurance and education services – sectors flagged by brokerages like Jefferies and Nomura as likely beneficiaries Items taxed at 12 per cent, including jam, pasta, frozen vegetables, umbrellas, carpets, footwear under ₹1,000, and feeding bottles, may see rates slashed to 5 per cent, giving households direct relief. Why the change now? The current GST system has four main slabs, that is 5 per cent, 12 per cent, 18 per cent, and 28 per cent, and has long faced criticism for its complexity. Industry bodies have pushed for a simpler regime with fewer slabs and lower rates on essentials. Reports suggest the government aims to boost consumption ahead of the festive season, while also balancing inflation concerns. The economic impact Brokerage firm Citi estimates that moving most 12 per cent slab items into the 5 per cent basket could lead to a revenue loss of up to 0.15 per cent of GDP, but would also provide a policy stimulus worth around 0.7 per cent of GDP in FY26. Experts say rationalisation will need to strike a balance between affordability for consumers, inflation control, and revenue neutrality for the government. What stays expensive? Not everything will get cheaper. Goods classified as luxury or harmful, such as cigarettes, pan masala, and alcohol, are expected to remain under a higher 40 per cent GST slab. Automobiles and luxury durables could also continue attracting higher taxes. If implemented as indicated, these reforms could be India’s biggest tax reset since GST’s rollout in 2017. They could simplify compliance, reduce costs for households, and spur demand across key sectors, from farming and consumer durables to insurance. However, the proposals are still under discussion, and the final decision lies with the GST Council, which will weigh fiscal risks against the political and economic push for tax relief. For now, the big question remains: Will Diwali 2025 really bring Modi’s promised “double Diwali” for Indian consumers? (With inputs from the agencies)

India is poised for significant Goods and Services Tax (GST) reforms, with Prime Minister Narendra Modi hinting at changes before Diwali 2025.

GST reset ahead of Diwali? Here’s what may become cheaper

As we track global trends in tax policies, Indian consumers may be headed for a major cut in indirect taxes. Finance Minister Nirmala Sitharaman has hinted at a major rehaul to the country's goods and services taxes and has even suggested that we may be headed for tax rate cuts.The proposed changes could ease prices for households while giving a boost to business sentiment.<h2>Items under the 12% tax slab rate</h2>Just last week, reports suggested that the GST council was looking to do away with the 12 per cent tax slab to make compliance easier. &nbsp;

Graphics showcasing items under the 12% Tax Slab Rate

The proposal added that essentials under the 12 per cent tax slab would be moved into a lower tax slab. However, much will depend on how these reforms are structured and whether they strike the right balance between simplicity and revenue needs. Lower GST rates could translate to reduced costs on goods and services, offering some relief from persistent inflation. A streamlined structure might also help make pricing more transparent.From an economic standpoint, simplifying the tax regime could improve compliance and reduce operational friction for businesses. Still, concerns remain around how this will affect states’ revenues, which are partly dependent on GST collections. Small businesses, while potentially benefiting from reduced complexity, May still face challenges adapting to new structures and reporting requirements.Internationally, India’s push mirrors a broader trend of tax reform aimed at economic competitiveness. The restructuring also seeks to address long-standing inefficiencies, but implementation will be key. As the country awaits the next GST council meeting, optimism is tempered by the need for careful design and broad-based consensus to ensure the reforms are both sustainable and equitable.&nbsp;

With plans to scrap the 12% GST slab, India eyes lower indirect taxes on key items—promising relief for consumers, streamlined compliance for businesses, and a more transparent, efficient tax structure.

As we track global trends in tax policies, Indian consumers may be headed for a major cut in indirect taxes. Finance Minister Nirmala Sitharaman has hinted at a major rehaul to the country's goods and services taxes and has even suggested that we may be headed for tax rate cuts. The proposed changes could ease prices for households while giving a boost to business sentiment. Items under the 12% tax slab rate Just last week, reports suggested that the GST council was looking to do away with the 12 per cent tax slab to make compliance easier.

India’s proposed GST reforms may eliminate the 12% slab, potentially making essential goods and services cheaper while aiming to simplify tax compliance.

India GST reforms: What will likely become cheaper?

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GST rate cuts on common goods: Relief for middle class, push for festive demand

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

GST reset ahead of Diwali? Here’s what may become cheaper

India GST reforms: What will likely become cheaper?