Nirmala Sitaram just announced two-slab GST (5% and 18%) scrapping the earlier four-slab GST system which was (5%, 12%, 18%, and 28%).
The new rates will be effective from September 22, starting of Navratri. Daily usage items will continue under nil tax while food & lifestyle items like Namkeen, chocolate, butter, ghee, and more have been brought under 5% rate instead of 18% earlier.
And for luxury items and harmful products a 40% “sin goods” rate + compensation cess were introduced.
Let’s understand in detail about the New GST rates and changes for 2025 that will help you manage your finances in a structured way.
Next-Gen GST Reform: Major Changes
In the 56th Council Meeting 2025 there were many big changes happened and many remains same those are:
GST Slabs:
Before this India was working with a four-slab structure 5%, 12%, 18%, 28%. But now things have changed to a two-slab structure which only includes 5% (for essential) and 18% (for most of the other items).
This structure will help the businessman and customers for easier billing and with less confusion with pricing.
Sin And Luxury Slab:
A new tax slab is introduced for luxury and harmful goods items like high-end luxury cars, premium IPL tickets, betting, pan masala, tobacco e.t.c.
This tax slab is passed with one motive to prevent consumers from unhealthy consumption and also for the rich to pay more.
Tax Free Insurance:
Previously we had 18% GST on health and life insurances that made policies costly to afford. But now people can take insurance with 0% tax.
This action will help people afford insurance that they were unable to do previously, premiums now get cheaper and affordable.
Daily Essential:
This is the highlight of the big change because every time middle class people suffer from the price hike on daily essentials because this is a part of their daily routine.
After this middle class peoples and consumers got a big relief, products like milk, butter, panneer, toothpaste, soap, shampoo, having cream, oil, packed food, and many more daily essential things now at the lowest 5% GST. (Earlier 18%).
This will help them reduce the monthly billing of groceries and household bills.
Electronics & Home Appliances:
Earlier we were paying 28% GST on home appliances and electronic products making it difficult to purchase them. But now the rate of GST on electronics and home appliances products like TVs, Washing Machines, Dishwashers, ACs, Coolers, and more are now slashed to 18% making it cheaper and affordable to users.
This will help both seller and customer to purchase their favorite items mainly in festival seasons because in festivals many discounts were available and on top of that GST reduced with 28% to 18% that is a win-win situation.
Cars And Two Wheelers:
GST rates on motorcycles and cars are now cut from 28% to 18% making small vehicles and bikes more affordable for common customers or buyers.
Fisheries Sector Support:
Material like fish nets, fish food, ice boxes, and more were cut from 12% to 5% encouraging fishermen to increase productivity.
The aim of this change is to make the Indian fish exports more competitive in the global market and increase productivity at a larger scale.
Minor Changes In New GST Or Remains Same
Here are some minor changes or you can say that no changes happen in these categories. Have a look into these categories also:
Electric Vehicles (Ev’s):
The government has decided to keep EV’s at the lowest 5% tax slab to promote clean energy and eco friendly mobility. Keeping this at 5% is already a good decision compared to diesel or patrol vehicles which are at higher tax slabs.
This means the electrical vehicles buyer will not see any price hike in the coming year.
Mobile Phones:
Despite having a large demand in the electronics market the government has decided not to increase GST rates on smartphones. The GST rate will remain the same as 18%, meaning the buyer will not see any dip and surge in prices.
Retail Apparel:
The clothing sector is also a high demand sector. Now clothes priced above 2,500 per piece will now be at 18% GST rate that previously at 12% tax slab. But the good news is everyday wear remains at the same tax rate but branded products get a bit costly.
Gaming & Betting:
This category is now combined with the new tax slab which is “sin goods” like premium, luxury and alcohol items. Sections like real-money gaming apps, high-value sports, betting apps, expensive IPL tickets like VIP box will come in the 40% tax slab now.
The main purpose to introduce these new tax sections is to discourage people or better yet spend money online and strictly from online gambelling.
Coal Tax:
Coal is now at the higher tax slab because of the pollution impact on the environment, this may encourage the shift towards clean energy rather than polluting the environment.
One impact of this is that we may see some price hike in electricity as a major part of producing electricity is coal in India currently.
Carbonated Drinks:
The drinks category remains the same as before which is 40%. The government decided not to interfere in this section because it’s already at the higher tax slab so the drinks tax remains the same as before.
To Sum Up
The GST 2.0 restructure is the largest tax reform undertaken since 2017 that provides relief in one household with cheaper essentials, lowered rates on cars, cement, and electronics, and a complete exemption under GST on health and life insurance. At the same time, more taxes, under the new 40% slab, are slapped on luxury goods, online gaming, and highly polluting products. The businesses need to gear up quickly to make changes to their pricing and tax strategies with fewer rates and simpler compliance.
Here at Regible Corporate LLP , we assist individuals, startups, and enterprises in smoothly navigating these changes, ensuring full compliance, and realizing maximum savings from the new GST regime.
FAQs
What is the GST 2.0 restructure?
The new GST 2.0 simplifies in just two tax slabs 5% & 18% which make it more convenient than before. New sin & luxury tax introduced with 40% rate, daily essentials got cheaper and more.
Who can benefit from the new gst realignment?
Small to mid level enterprise and business owners benefit from these tax cutoffs also the middle class families are now able to save the monthly bills.
Are there any GST changes in the liquor category?
No, this remains the same as before which is 40%. They do not want to interfere in this section because it’s already at a higher rate.
Is there any changes happening in car insurance GST rates?
No confirmed changes yet, the care insurance tax remains at the same which is 18% GST.
Does the GST on solar panels remain the same?
Renewable energy product category and solar panels saw a dip in the tax rate which was 5% earlier 18%.
What is the rate of GST on gold in India?
The current GST rate of gold in India is 3% with an additional 5% making charges. It remains the same as before.
