India’s Goods and Services Tax (GST) regime is undergoing a major transformation, bringing a simplified rate structure into effect from 22 September 2025. The new system aims to make essentials more affordable for consumers, while maintaining high levies on luxury and sin goods to discourage excessive or harmful spending.
A Streamlined GST Structure
The revised GST now has only four slabs: Nil, 5%, 18%, and 40%. With this move, most of the earlier 12% and 28% categories have been rationalised into the 5% and 18% brackets. Items linked to luxury or health risks continue to draw the steepest rate of 40%, along with applicable cess.
What Gets Cheaper?
Daily Essentials
Consumers will notice a significant drop in prices for everyday items. Products like UHT milk and Indian breads are now tax-free, while staples such as butter, ghee, cheese, and condensed milk have moved down from 12% to 5%.
Personal care basics, including hair oil, toothpaste, soaps, toothbrushes, and shaving cream, also shift from 18% to 5%, offering relief to households. Similarly, nuts, dry fruits, baby diapers, utensils, feeding bottles, and sewing machines now attract just 5% GST. Packaged snacks, sweets, and even plain packaged water join the list of cheaper goods.
Agriculture and Fertilisers
Farmers benefit too, with GST on fertilisers dropping from as high as 18% to 5%. The same applies to tractors, tyres, parts, irrigation and cultivation equipment, all of which are crucial to agriculture.
Healthcare and Education
Healthcare and education receive a major boost under the revised regime. Health and life insurance have been exempted from GST altogether. Products like thermometers, medical oxygen, test kits, spectacles, notebooks, pencils, crayons, and erasers have either moved down to 5% or Nil, directly supporting households and institutions.
Electronics and Automobiles
Big-ticket items also become more accessible. Air conditioners, large televisions, projectors, dishwashers, and monitors now fall under the 18% slab instead of 28%. Even smaller cars powered by petrol, hybrid, LPG, or CNG engines (≤1200 cc and 400 mm) are cheaper at 18%.
Other Sectors
A wide range of products, including renewable energy equipment, construction materials, sports goods, toys, handicrafts, leather, and wooden items, are now taxed at 5%, making them more affordable for consumers.
What Remains Expensive?
While most essentials have been made cheaper, sin and luxury items remain heavily taxed. Products such as pan masala, tobacco, gutkha, cigarettes, and bidis continue at steep slabs with additional cess. To plug tax evasion, the levy is now calculated on the retail sale price, which raises the effective burden on these goods.
In addition, sweetened and flavoured beverages, including aerated drinks, face an increased GST of 40%, up from 28%.
Balancing Affordability and Policy
By bringing essentials, agriculture, healthcare, and education products into the lower slabs, the revised GST ensures relief for everyday consumers. At the same time, higher rates on luxury and sin categories uphold policy objectives of discouraging unhealthy consumption and maintaining revenue balance.
Conclusion
The GST reform, effective from 22 September 2025, represents a decisive step towards simplification and consumer relief. Essentials, farm inputs, and healthcare products are now more affordable, while luxury and sin goods continue to attract steep taxes. This restructuring aligns affordability with broader policy goals, streamlining compliance while supporting households and key sectors of the economy.
