GST Rates Revised – Know the Key Highlight and What Got Cheaper!

In the 56th GST Council meeting, which ran for more than 10 hours on 3rd September, 2025, Finance Minister Nirmala Sitharaman announced major tax cuts, while bringing in a two-tier tax system. The GST Council approved the two-tier tax structure, which will now have tax slabs of 5% and 18%. This new tax structure will be implemented from September 22.

What made this GST Council meeting extraordinary is that several items will now come under 0% or nil tax, and on the other hand, some items will come under the tax rate of 40% or “sin tax” slab.

Key Highlights

1. The current four-tier structure of GST is replaced by a two-tier structure, thereby bringing in a “Simple Tax” structure
2. 18% is the Standard Rate and 5% is the Merit Rate
3. Apart from the above two tax slabs, some items will come under 0% and 40% tax slabs.
4. All essential food items will attract 0% tax, i.e. they will be tax-free
5. Various everyday products will now be levied with a tax rate of 5%, reduced from the erstwhile 18%

What Got Cheaper

• Tax on everyday food items like butter, ghee, jam, jellies, biscuits, cornflakes, cereals, sugar, meat, dry fruits, milk-based beverages, juice, fruit pulp, condensed milk, sausages, tender coconut water, namkeen, 20 litre drinking water bottle, ice cream, pastries and sweets is now reduced to 5% from 18%.
• Tax on household items like utensils, kitchenware, umbrellas, feeding bottles, tableware, bamboo furniture, combs, and tooth powder is now reduced to 5% from 12%.
• Personal care products like shampoo, toothpaste, toothbrush, face powder, soap, talcum powder and hair oil will now be taxed at 5%, reduced from the erstwhile 18%.
• No GST on UHT Milk, Paneer, packaged Chenna, all the Indian breads (roti, chapati, parantha) will see a nil rate.
• To enhance wider insurance expansion and adoption, all life and health insurance policies are exempted from GST.
• For consumer durables like air conditioners, dishwashers, TVs and motorcycles of up to 350 cc, the applicable GST rate will be 18%, reduced from the erstwhile 28%
• The two-tier structure will also reduce the prices of cement, as the tax rate is reduced to 18% from 28%. The benefit of the standard rate of 18% will extend to products like smaller vehicles, both of LPG and CNG variants, that are under 1200 cc and 4000 mm in length, and that for diesel vehicles that are under 1500 cc and 4000 mm in length.

Other Points to Take Note Of

• Large vehicles that exceed 1200 cc (petrol) or 1500 cc (diesel) will attract a tax rate of 40%.
• Electric vehicles will continue to attract a GST of 5%.
• Luxury items like selected automobiles, cigarettes, and tobacco will attract the sin tax slab rate of 40%.
• Note that the tax rate on tobacco, gutkha and similar products will remain at 28% along with the compensation cess until and unless the complete repayment of the loans that were taken by the states for the compensation of revenue loss.

The revised GST structure has brought in the much-needed relief to the common man and the middle class, as the government has taken up significant measures to reduce the tax burden associated with daily-use household items.

Stay tuned to remain updated and understand the underlying implications of this Simple Tax structure, as we bring in our expert analysis.

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