In a landmark move aimed at simplifying India’s indirect tax system, the GST Council has approved sweeping reforms under the banner of “GST 2.0,” set to take effect from September 22, 2025. The new structure introduces a streamlined two-tier rate system—5% and 18%, with a special 40% slab for luxury and sin goods. The reforms are expected to ease the financial burden on middle-class households while tightening levies on high-end consumption.
What Will Get Cheaper
The revised GST rates bring relief across a wide spectrum of daily-use items and essential goods:
Daily Essentials: Hair oil, soaps, toothpaste, toothbrushes, shaving cream, and toilet soap now taxed at 5%, down from 12–18%2.
Food & Groceries: UHT milk is now tax-free, while condensed milk, butter, paneer, ghee, cheese, malt, pasta, cornflakes, biscuits, chocolates, and cocoa products drop to 5% GST.
Baby Products: Feeding bottles, baby napkins, and nappies now fall under 5% GST, down from 12%.
Dry Fruits & Snacks: Almonds, cashews, pistachios, dates, namkeen, bhujia, and other savory snacks now taxed at 5%.
Footwear & Textiles: Mass-market shoes and clothing items now attract 5% GST, down from 12%.
Handicrafts & Construction Materials: Items like marbles, granite blocks, and handmade goods now taxed at 5%.
Small Vehicles & Public Transport: Buses, ambulances, trucks, three-wheelers, motorcycles up to 350cc, and small cars now taxed at 18%, down from 28%3.
What Will Get Costlier
The government has introduced a steep 40% GST slab for luxury and sin goods to discourage excessive consumption:
Luxury Vehicles: Motorcycles above 350cc, yachts, helicopters, and aircraft for personal use now fall under the 40% GST bracket3.
Tobacco & Related Products: Pan masala, cigarettes, bidis, and other tobacco items will attract 40% GST, with cigarettes continuing under 28% GST plus compensation cess.
Sugary & Aerated Drinks: Beverages with added sugar, including carbonated and caffeinated drinks, now taxed at 40%3.
High-End Appliances: Air conditioners, dishwashers, and large TVs will continue to attract higher GST rates, though smaller TVs now fall under the 18% slab.
Government’s Vision
Finance Minister Nirmala Sitharaman described the reforms as a “structural overhaul” aimed at improving the ease of living and doing business. Prime Minister Narendra Modi hailed the changes as a “Diwali gift for the nation,” emphasizing their benefits for farmers, MSMEs, women, youth, and small traders3.
The estimated revenue impact is ₹48,000 crore, but officials remain optimistic about buoyant collections and long-term fiscal sustainability.
These reforms mark a significant shift in India’s tax landscape, balancing affordability for the masses with accountability for luxury consumption.