New Delhi: The 56th GST Council meeting has approved historic tax reforms that will benefit both businesses and the common man. From September 22, 2025, a two-rate GST system of 5 percent and 18 percent will replace the older four-slab system of 5 percent, 12 percent, 18 percent, and 28 percent. The aim is to reduce confusion, cut costs, support small traders, and make daily life more affordable.
Food and Essentials to Cost Less
A wide range of daily-use items will now attract lower GST. For example:
- UHT milk will now be tax-free, like regular milk.
- Paneer, butter, ghee, cheese, and condensed milk will now be taxed at 5 percent or nil, down from 12 percent.
- Dry fruits and nuts, like almonds and cashews, will also be at 5 percent.
- Packaged foods such as edible oils, sausages, and namkeens will now be cheaper with GST at 5 percent.
- Vegetable waters and non-sweetened aerated waters will move from 18 percent to 5 percent.
Healthcare Gets Cheaper
All life-saving medicines and essential medical devices will now be taxed at 5 percent or even nil in some cases. This change will lower the burden on patients without harming manufacturers, who will still be able to claim input tax credits (ITC).
Support for Agriculture and Farmers
To help farmers, GST on fertilisers and agricultural machinery such as sprinklers, threshers, and composting machines has been reduced to 5 percent from 12 percent. This ensures affordability for farmers while also protecting domestic manufacturing, which can still claim ITC.
Vehicles to Become More Affordable
Small petrol, diesel, LPG, and CNG cars (up to 1200 cc and 4000 mm) and three-wheelers will now attract 18 percent GST, down from 28 percent.
Motorcycles up to 350 cc are also down to 18 percent, while bigger bikes and cars will be taxed at 40 percent.
Bicycles and their parts will be cheaper with GST cut from 12 percent to 5 percent.
Everyday Items Made Affordable
To ease costs for lower and middle-income families, GST has been reduced to 5 percent on items like:
- Toothpaste, toothbrushes, and dental floss
- Toilet soaps
- Face powder and shampoo
- TVs and monitors of all sizes (now all taxed at 18 percent)
- Air conditioners and dishwashers (down from 28 percent to 18 percent)
Insurance and Clean Energy See Boost
GST on health and life insurance policies has been made zero, covering individual term plans, ULIPs, endowment policies, and reinsurance.
Renewable energy devices, like solar panels and wind energy systems, will attract just 5 percent GST, down from 12 percent, encouraging green energy adoption.
Special 40 percent GST for a Few Products
Some products will still be taxed higher. Pan masala, gutkha, cigarettes, tobacco products, and carbonated sugary drinks will now be taxed at 40 percent. These are seen as harmful or luxury goods. However, the final rollout for these goods will happen later, after pending compensation cess loans are paid off.
Why These Changes Matter
The new GST system removes confusion, supports small businesses with easier compliance, and reduces daily expenses for families. With uniform lower rates, better refund systems, and affordable pricing across sectors, India’s economy is expected to grow faster and more fairly.
