The Goods and Services Tax (GST) Council has announced a landmark reform in India’s indirect taxation system. GST was introduced in 2017 to replace a single, transparent tax system across India with a multiple tax system. The four different rates – 5 %, 12%, 18%, and 28% on the goods and services confused the common man. The reform has simplified the tax system into two major slabs: 5% and 8%, and a 40% rate for luxury goods and services, as well as harmful goods. The new reform is intended to boost the consumption by 60% of India’s Gross Domestic Product (GDP). For a common man, this means cheaper groceries, medicines, household goods, and educational supplies and at the same time, the new GST rates that luxury goods, cars, carbonated drinks, tobacco, and gambling attract the highest tax possible.
This blog will help you to understand the new GST rates in detail and compare the old rates with the new ones.
Effective Date of the GST 2.0 Reform
The GST reform shall be effective from 22.09.2025.
5% slab → It covers the essential goods and services.
18% slab → It covers the most goods and services of general consumption.
40% special slab → High percentage applied on the luxury items, automobiles, tobacco, aerated drinks, gambling, and similar activities.
GST Structure 2025: Old Vs New Rates
| Essentials and Packaged Foods | |||
| S. No. | Item / Group/Services | Old Rate | New Rate |
| 1. | Indian breads, including chapati/roti, paratha/parotta | 5% | Nil |
| 2. | UHT milk | 5% | Nil |
| 3. | Chena/paneer pre-packaged and labelled | 5% | Nil |
| 4. | Condensed milk | 12% | 5% |
| 5. | Butter, ghee, butter oil | 12% | 5% |
| 6. | Cheese | 12% | 5% |
| 7. | Dry fruits & nuts such as almonds, pistachios, etc., dried fruits | 12% | 5% |
| 8. | Common packaged foods such as namkeen/bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, etc. | 12-18% | 5% |
| Plant-based and Speciality Dairy Alternatives | |||
| 9. | Plant-based milk drinks | 18% | 5% |
| 10. | Soya milk drinks | 12% | 5% |
| Personal Care and Home Care | |||
| 11. | Hair oil, shampoos | 18% | 5% |
| 12. | All kinds of dishwashers | 28% | 18% |
| 13. | Toothpaste, toothbrushes, dental floss | 18% | 5% |
| 14. | Toilet soaps (bars/cakes), shaving creams/lotions | 18% | 5% |
| 15. | Talcum/face powders, aftershave | 18% | 5% |
| 16. | Utensils & table/kitchenware; umbrellas; baby feeding bottles; bicycles & parts; bamboo/cane/rattan furniture; combs; hurricane/kerosene lamps | 12% | 5% |
| Electric Appliances | |||
| 17. | Air-conditioners | 28% | 18% |
| 18. | Televisions and monitors/projectors / set-top boxes
(all TVs now at 18%) |
28% | 18% |
| 19. | Solar water heaters/systems | 12% | 5% |
| Stationery, Paper and Books | |||
| 20. | Pencils, crayons/pastels, maps/charts/globes, exercise/notebooks | 12% | Nil |
| 21. | Erasers | 5% | Nil |
| 22. | Uncoated paper/paperboard used for notebooks | 12% | Nil |
| 23. | Pulps and several packaging papers, including paper sacks/biodegradable bags, trays, cartons/boxes) | 12% | 5% |
| 24. | set of higher-grade papers, such as those with the dissolving pulp, certain coated papers) | 12% | `8% |
| Healthcare (medicines, devices, and supplies) | |||
| 25. | 33 life-saving drugs | 12% | Nil |
| 26. | All other drugs and medicines | 5% | Nil |
| 27. | Medical devices/apparatus used for medical/surgical/dental/veterinary or lab analysis | 12% | 5% |
| 28. | Supplies like wadding/gauze/bandages, diagnostic kits & reagents, glucometers/test-strips | 18% | 5% |
| 29. | Corrective spectacles | 12% | 5% |
| 30. | Thermometers | 12% | 5% |
| Insurance | |||
| 31. | Individual life insurance (all the types, including term, ULIP, and endowment) + reinsurance | 18%
(with ITC) |
Nil |
| 32. | Individual health insurance (including family floater/senior citizen) + reinsurance | 18%
(with ITC) |
Nil |
| Vehicles and automobile components | |||
| 33. | Small cars | 28% | 18% |
| 34. | Motorcycles ≤ 350cc | 28% | 18% |
| 35. | 3-wheelers; buses, trucks, ambulances | 28% | 18% |
| 36. | Uniform rate on auto parts | Mixed rate | 18% (uniform) |
| 37. | EVs | 5% | 5%
(no change) |
| 38. | Small petrol/LPG/CNG cars (<1200cc, ≤4,000mm) & small diesel cars (≤1500cc, ≤4,000mm) | 28% | 18% |
| Agriculture, irrigation and items used in rural areas | |||
| 39. | Tractors (except road tractors >1800cc) | 12% | 5% |
| 40. | Fixed-speed diesel engines ≤15HP; agricultural diesel engine (>250cc) for tractors | 12-18% | 5% |
| 41. | Hydraulic pumps for tractors; other hand pumps | 18%/12% | 5% |
| 42. | Nozzles/sprinklers; drip irrigation systems | 12% | 5% |
| 43. | Machinery for soil prep/harvesting/threshing; composting machines | 12% | 5% |
| 44. | Fertiliser inputs: sulphuric acid, nitric acid, ammonia | 18% | 5% |
| 45. | Micronutrients under FCO 1985; biopesticides (Bt, Trichoderma, neem, etc.) | 12% | 5% |
| Construction and Energy | |||
| 46. | Cement | 28% | 18% |
| 47. | Coal (with cess rationalisation) | 5%
(cess varies) |
18% |
| Sewing machines, their parts, and yarn | |||
| 48. | Sewing machines | 12% | 5% |
| 49. | Parts of sewing machines | 12% | 5% |
| 50. | Needles | 12% | 5% |
| 51. | Man-made fibre | 18% | 5% |
| 52. | Yarn | 12% | 5% |
| 53. | Fertiliser inputs (chemicals like sulphuric acid, ammonia | 18% | 5% |
Hotels, Flights & Transport Services
| S. No. | Service | Old | New | ITC |
| 54. | Hotel accommodation less than ₹7,500 per room/night | 12% | 5% | Without ITC |
| 55. | Air tickets for the economy class | 5% | 5% | No change |
| 56. | Air tickets other than economy | 12% | 18% | With ITC |
| 57. | Goods transport by GTA | 5% no ITC
OR 12% with ITC |
5% no ITC
OR 18% with ITC |
As shown |
| 58. | Container rail (non-IR) | 12% | 5% no ITC
or 18% with ITC |
As shown |
| 59. | Multimodal goods transport (no air leg) | 12% | 5% (restricted ITC: only 5% of input services of goods transportation) or 18% with ITC | As shown |
| 60. | Passenger transport by motor vehicle (fuel included) | 5%
(restricted ITC) OR 12% with ITC |
5% (restricted ITC)
OR 18% with ITC |
As shown |
| 61. | Renting of a passenger vehicle
(with operator, fuel included) |
5%
(restricted ITC) OR 12% with ITC |
5% (restricted ITC)
OR 18% with ITC |
As shown |
| 62. | Renting of goods carriage
(with operator) |
12% | 5%
(restricted ITC) OR 18% with ITC |
As shown |
Leisure and Gaming
| S. No. | Item / Service | Old Rate | New Rate |
| 1. | Aerated & caffeinated drinks; other non-alcoholic beverages; all flavoured sugar-added drinks | 28% | 40% |
| 2. | Luxury automobiles (>1200cc and >4,000mm), motorcycles >350cc, yachts, personal-use aircraft, racing cars | 28% plus cess in the old regime | 40% |
| 3. | Casinos, gambling, horse racing, online money gaming, IPL tickets, and race club licensing | 28% | 40% |
Important Points
- The new GST rates shall be effective from 22 September 2025 for most goods and services, but not for tobacco and related products, such as cigarettes, gutkha, pan masala, and bidis, which will continue under the old GST (28%) plus a special cess until the government repays the load it had taken to compensate states during the COVID-19 epidemic.
- In many services, the Council gave businesses an option to charge 5% (no ITC) or charge 18% (with ITC). The businesses have to choose whichever option suits them best and set the final price.
Reference
Press Release: Press Information Bureau
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