GST 2.0 New Rates 2025: Full Item List & What’s Cheaper / Costlier

Introduction: India’s Biggest GST Overhaul Since 2017

India has rolled out GST 2.0, the largest reform in indirect taxation since the Goods and Services Tax was first introduced in July 2017. At the 56th GST Council Meeting, chaired by Union Finance Minister Nirmala Sitharaman and attended by ministers from 31 states and UTs, the Council approved sweeping structural changes.

Effective September 22, 2025—the first day of Navratri—the reform simplifies the earlier multi-slab system (0%, 5%, 12%, 18%, 28%) into just two main slabs (5% and 18%), along with a 40% demerit/luxury slab for select goods.

The changes aim to:

  • Ease the tax burden on common households.

  • Boost consumption of essential and durable goods.

  • Simplify compliance for businesses.

  • Ensure balanced taxation by keeping luxury and “sin” goods highly taxed.

New GST Structure at a Glance

Slab

Items Covered

Earlier Rate

New Rate

Impact

Nil GST (0%)

UHT milk, paneer, rotis, khakra, school erasers, basic education services, individual life & health insurance

5% / 12%

Nil

Essentials & protection made tax-free

5% (Merit Rate)

Butter, ghee, cheese, juices, ketchup, shampoos, soaps, bicycles, agri machinery, bio-pesticides, medical devices, yoga/gym services

12–18%

5%

Daily-use items significantly cheaper

18% (Standard Rate)

Air conditioners, TVs, refrigerators, dishwashers, cement, small cars, entry-level bikes, auto parts, apparel > ₹2,500

28%

18%

Big-ticket purchases more affordable

40% (Demerit/Luxury Slab)

Tobacco, pan masala, gutkha, cigarettes, luxury cars, SUVs, carbonated/caffeinated drinks

28% + cess

40%

Premium items remain costly


Essentials & FMCG (Nil or 5%)


GST 2.0 delivers maximum relief on household and grocery items:

  • Nil GST: Packaged paneer, UHT milk, pizza bread, chapatis, paranthas, school stationery like erasers.

  • 5% GST: Butter, ghee, cheese, condensed milk, namkeen, chips, pasta, noodles, ketchup, jams, shampoos, soaps, toothbrushes, toothpaste, bicycles, tableware, bio-pesticides, medical devices (thermometers, glucometers, oxygen kits, spectacles).

Impact: Lower grocery bills, cheaper personal care products, and affordable basic health devices. FMCG demand is expected to rise across both urban and rural India.

Consumer Durables & Automobiles (18%)

High-value purchases now attract lower GST:

  • White goods: ACs, TVs (above 32”), refrigerators, dishwashers → 18% (down from 28%).

  • Automobiles: Small cars (≤1200cc petrol, ≤1500cc diesel, length ≤4m), motorcycles ≤350cc → 18% (down from 28%).

  • Other: Cement, buses, trucks, ambulances, apparel priced above ₹2,500.

Impact: Middle-class families benefit as cars are now cheaper by ₹40,000–₹75,000. White goods and cement affordability will drive festive season demand and housing projects.

Luxury & Demerit Goods (40%)


To discourage excessive consumption of harmful and luxury products, a 40% slab has been introduced:

  • Tobacco products, cigarettes, gutkha, pan masala.

  • Carbonated & caffeinated beverages.

  • Mid-size and luxury cars, SUVs.

Impact: Prices remain high for premium buyers, while the government ensures revenue stability.

Impact on Households

  • Lower grocery bills: Essentials like ghee, paneer, milk products now at 0–5%.

  • Cheaper upgrades: Cars, ACs, refrigerators, and cement fall to 18%, making lifestyle upgrades affordable.

  • Health & protection tax-free: Life and health insurance fully exempt, along with 36 critical/life-saving drugs.

Impact on Businesses

  • Simplified compliance: Only two main slabs reduce classification disputes.

  • Boost in demand: Lower rates will encourage higher consumption volumes.

  • Export competitiveness: Lower logistics and input costs (fertilizers, textiles) strengthen India’s global trade positioning.

  • Ease of working capital: Correction of inverted duty structures, particularly in textiles and fertilizers.

Sectoral Analysis

  1. FMCG: Lower GST on soaps, shampoos, toothpaste → expected 15–20% sales growth in Q3 2025.
  2. Auto sector: Maruti Suzuki, Hyundai, Bajaj already announced price cuts. Small cars are cheaper by ₹40,000–₹75,000.
  3. Electronics: Consumer durables (ACs, TVs, refrigerators) to see festive sales surge.
  4. Textiles: Manmade fibre and yarn cut to 5% (from 12–18%) → boosts MSMEs.
  5. Fertilizers: Inputs like sulphuric acid, nitric acid, ammonia reduced to 5% → benefits the agriculture sector.
  6. Hospitality: Budget hotels (≤₹7,500) at 5% GST will encourage domestic tourism.

Leadership & Industry Reactions

  • PM Narendra Modi: “The reforms will benefit the common man, farmers, MSMEs, middle-class, women, and youth. These changes will ease lives and boost economic activity.”

  • FM Nirmala Sitharaman: “We have corrected inverted duty structures and simplified GST to ensure predictability and ease of doing business.”

  • CII (Confederation of Indian Industry): Welcomed the decision, calling it “pathbreaking and compliance-easing, with benefits for both consumers and businesses.”

Fiscal Impact

  • Estimated net revenue implication: ₹48,000 crore.

  • Despite state concerns of ₹80,000 crore revenue loss, the Council agreed unanimously.

  • The government claims the reform is “fiscally sustainable” and will boost consumption-led growth.

Why This Matters for India’s Economy

  1. Savings for families: Reduced taxes on essentials increase disposable income.
  2. Growth for industries: FMCG, auto, and electronics sectors gain demand momentum.
  3. Simplification: Only two slabs reduce classification disputes and litigation.
  4. Balanced taxation: Essentials made cheaper, luxury taxed higher.
  5. Global competitiveness: Lower input costs boost exports and MSME participation.

Bottom Line

India’s new GST structure (5%, 18%, 40%) marks a turning point in tax policy. Essentials and consumer durables are cheaper, health and insurance are tax-free, and luxury goods remain expensive.

This reform balances consumer affordability, business competitiveness, and government revenue needs. With the festive season around the corner, GST 2.0 could act as a catalyst for consumption-led growth in India.

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