GST Scheme Revamp

The Goods and Services Tax (GST) scheme in India is undergoing significant changes as announced by Union Finance Minister Nirmala Sitharaman after the 56th GST Council meeting on September 3, 2025. The revamp aims to simplify the tax structure with a primarily two-rate system.

New GST Rates

• Two-Rate System: The new GST system will consist mainly of two rates: 5% and 18%.
• Special Rate of 40%: A 40% rate will be applied to "sin goods" like tobacco and luxury items such as large cars, yachts, and helicopters.

Changes in Tax Slabs

Several items will see changes in their tax slabs:

• Move to 5% slab: 
  • Household goods: hair oil, soap, shampoo, toothbrush, toothpaste, bicycle, table and kitchen ware.
  • Food items: namkeens, sauces, pasta, instant noodles, chocolates, coffee, and butter.
  • Others: Twelve specified bio-pesticides, bio-menthol, handicrafts, marble, travertine blocks, granite blocks, and intermediate leather goods.
• Cement will move from 28% to 18%.
• Items moving to 0% slab: 
  • Dairy and bread: ultra-high temperature milk, paneer, and all Indian bread including rotis, chapatis, and parathas.
• GST on air-conditioners, TVs, dishwashers, small cars, and motorcycles (≤ 350cc) will reduce from 28% to 18%.
• Buses, trucks, ambulances, and auto parts will attract 18% GST.
• 33 lifesaving drugs and medicines will move to 0% from 12%.
• Spectacles to correct vision will move from 28% to 5%.
• Individual life and health insurance policies will move to 0% from 18%.

Sin Goods and Compensation Cess

• The GST rate on pan masala, gutka, cigarettes, chewable and unmanufactured tobacco, and bidi will remain at 28%, with a compensation cess.
• Once the Centre repays the loans borrowed to compensate States, these items will move to the 40% slab.