The latest on India’s GST reform for 2025:
The GST Council, chaired by Finance Minister Nirmala Sitharaman, has overhauled the tax structure, replacing the existing four slabs (5%, 12%, 18%, 28%) with a more streamlined two-tier system plus a special outlier:
5% ("merit rate") — For daily necessities and common goods.
18% ("standard rate") — For aspirational and mid-range products.
A new 40% "de-merit" slab — For luxury and sin goods.
Old GST Slabs - 0%, 5%, 12%, 18%, 28%
New GST Slabs 2025 - 0%, 5%, 18%, 40%
When Do These Changes Come Into Effect?
These reforms take effect from September 22, 2025.
Notable Highlights of the New GST Rate Structure
1. 0% slab Zero-rated essentials:
· Lifestyle essentials like UHT milk, paneer, and breads (roti/chapati/paratha) are now completely exempt (0%).
· Services like life and health insurance are now GST-exempt (0%)
2. 5% slab includes:
· Processed staples: butter, ghee, cheese, chocolates, pasta, Namkeens, Noodles.
· Personal Care and Toiletries: Shampoo, Toothpaste, Shaving Cream, Toilet Soap, Hair Oil.
· Daily-use household items and stationery like notebooks, pencils, erasers.
· Affordable footwear (e.g., under ?2,500).
· Baby care products (diapers, bottles), kitchen appliances, etc.
· Hotel (Room rent <Rs.7500)
· Movie Tickets
3. 18% slab now applies to:
· Electronics and appliances: air conditioners, TVs (>32"), dishwashers.
· Vehicles: small cars (1200cc to <4000mm), motorcycles under 350cc, three-wheelers, small commercial vehicles, cement.
· Agricultural and industrial goods - fertilizer manufacturing items, tools, machinery, renewable energy equipment (solar panels, biogas plants)
· 5-Star Hotel Food
4. 40% slab on luxury/sin goods:
· Includes tobacco products, Cigarettes, Gutkha, aerated and caffeinated drinks, alcohol- free sugary beverages, luxury automobiles (like high-end cars, motorcycles >350?cc), yachts, helicopters, and pan masala.
· Personal Aircraft & Vessels - Yachts and other pleasure vessels, Aircraft or helicopters intended for personal use.
· Luxury Bike and cars (Royal Enfield classic, Hunter, KTM, Harley)
· Entertainment Levy - Casino, Betting, IPL entry.