Simpler, Fairer, Cheaper: What the Next-Gen GST Means for Everyday India

In a grand gesture termed a "historic Diwali gift" for families, farmers, and enterprises, Finance Minister Nirmala Sitharaman unveiled a total rationalisation of the Goods and Services Tax (GST) rates across the board today. The new rates, cleared in the 56th GST Council meeting, will take effect on September 22, 2025 — the first day of Navratri.

The Next-Gen GST Reform seeks to lighten the load on consumers, streamline compliance, and provide a boost to domestic industries and MSMEs.

Major Highlights of the Rate Rationalisation

Essential daily items made affordable

Consumer goods like soaps, shampoos, toothpaste, shaving cream, and bicycles will now incur only 5% GST, lower from 12–18%.

Edible items such as butter, ghee, cheese, chocolates, sauces, coffee, and pre-packaged namkeens will also incur a cut to 5%.

No tax on essentials

UHT milk, paneer, Indian breads (roti, paratha, etc.), maps, globes, pencils, sharpeners, and notebooks will no longer have GST.

Farmers' & agriculture relief

GST on tractors, tyres, bio-pesticides, drip irrigation systems, sprinklers, fertilisers, and farm machinery has been reduced to 5%.

Composting machines and other farm machinery will now cost 18%, from earlier 28%.

Healthcare sector relief

All private life insurance policies are exempted from GST.

GST on glasses, vision-improving goggles, diagnostic kits, thermometers, oxygen, and glucometers has been slashed to 5%.

33 lifesaving medicines now come with zero GST.

More affordable cars & transport

GST on small vehicles, motorcycles with engines of less than 350 cc, buses, trucks, ambulances, and three-wheelers has been slashed from 28% to 18%.

All auto components now attract 18% tax.

Electronics & appliances

Consumers will gain from reduced taxation of air-conditioners, all sizes of televisions, washing machines, monitors, projectors, and dishwashers — from 28% to 18%.

Relief to labour-intensive industries

Handicrafts, natural menthol, marble, leather items, renewable energy equipment, and some medical appliances will now have only 5% GST.

40% special duty for sin and luxury items

Increased GST slab has been established for pan masala, gutka, cigarettes, chewing tobacco, caffeinated drinks, large automobiles and motorcycles (over 350 cc), yachts, aircraft, and helicopters for private usage.

Process & Refund Reforms

The government, in addition to the rate reductions, has implemented automatic GST registration within three working days and system-driven provisional refunds for taxpayers. Small enterprises and MSMEs availing the facility under the eased scheme shall also find relief from the burden of compliance.

PM Modi’s Statement

Prime Minister Narendra Modi hailed the reform as a festival gift to the nation, “The next generation of GST reforms are a gift for every Indian this Diwali. Taxes for the general public will be reduced substantially. MSMEs and small entrepreneurs will get huge benefit. Everyday items will become cheaper, giving a fresh boost to the economy.”

A Look at the New GST Rate Structure

Also Read: GST Council Approves Two-Tier Structure; New 5% and 18% Rates Effective Sept 22