On September 22, 2025, the Indian government will introduce sweeping changes to the Goods and Services Tax (GST) system. This reform, called “GST 2.0,” simplifies the current confusing tax structure, rolling four rates down to just two: 5% and 18%—and introduces a special 40% bracket for luxury and “sin” goods. This overhaul aims to make life more affordable for ordinary households while discouraging certain indulgent or harmful purchases.
In this guide, we’ll walk through the key winners and losers of this change—highlighting how family budgets, festival-season spending, and even the insurance industry will be impacted. We’ll use clear examples and simple language to explain exactly what each change means.
GST Rate Update 2025 (GST 2.0)
What Will Get Cheaper (The Big Reduction List)
Daily Essentials & Food Products (GST drops to 5% or even 0%)
- UHT milk (Ultra-High Temperature-treated) goes from 5% to 0%—so buying that long-shelf-life milk becomes more affordable.
- Paneer (pre-packaged and labelled) also moves from 5% VAT or custom state slab to 0%, meaning your cooking ingredients cost less.
- Butter, ghee, cheese, and dairy spreads shift from 12% down to 5%, easing the cost of rich cooking staples like tarka or toast.
- Condensed milk, dried nuts (almonds, cashews, hazelnuts, pistachios), sweet snacks like biscuits and chocolate, cornflakes, pasta, malt, and starches now fall under 5%, down from 12–18%.
- Namkeen/savoury snacks, dates, figs, dried fruits, fruit pulps, even ready-to-eat items like pizza bread and khakra—many of these traditional food items now cost less thanks to the 5% rate.
This means the groceries you reach for daily—milk, bread, snacks—will all become easier on the pocket, especially with festivals like Diwali just around the corner.
Everyday Personal & Home Care Items (All at 5%)
- Toothpaste, toothbrushes, soap, shampoo, hair oil, shaving cream, toilet soap—all are now taxed at 5%, down from 12–18%.
- Feeding bottles, baby nappies and napkins now cost less at 5%, down from 12%.
- Tooth powder, tableware, kitchenware, utensils, umbrellas, bicycles, bamboo furniture, combs, and other everyday utility items now have a 5% tax, reduced from 12%.
Buying home goods or caring for children or personal hygiene just became more affordable across the board.
Health, Education & Insurance (0% or 5%)
- Life-saving drugs, cancer medicines, rare-disease treatments, diagnostic kits, glucometers, test strips, medical grade oxygen, thermometers, and corrective spectacles now attract either 0% or 5% GST, making healthcare essentials cheaper.
- Individual life and health insurance policies will attract 0% GST—a major relief for policy buyers.
This will reduce the effective cost of medical care and insurance premiums—especially meaningful for middle-income families.
Education & Stationery (0%)
- Maps, charts, globes, pencils, sharpeners, crayons, pastels, exercise books, notebooks, erasers now come with 0% GST, down from 5–12%.
Good news for students and parents: school supplies just got cheaper.
Textiles, Apparel, Footwear (5%)
- Basic footwear and mass-market clothing are now 5%, down from 12%. (Note: this doesn’t apply to premium apparel over ₹2,500—see the “costlier” section.)
Electronics & Appliances (18%)
- Televisions (above 32″), air conditioners, dishwashers, washing machines, refrigerators, monitors, projectors now attract 18% GST, down from 28%.
So upgrading your home electronics will cost less, especially timely as festive season sales begin.
Automobiles & Components (18%)
- Small cars (including CNG, petrol hybrid under specific engine size/length limits), motorcycles up to 350 cc, and auto components generally now face 18% GST, down from 28%.
- Electric vehicles (EVs) remain at 5%, continuing to support the eco-friendly vehicle push.
Popular cars like the Mahindra Thar or Hyundai Creta may become noticeably cheaper to buy.
Construction & Infrastructure (18%)
- Cement now has a GST of 18% (down from 28%), helping reduce building costs.
- Agricultural machinery, farm implements, micro-nutrients, drip irrigation systems, and tractor parts now mostly fall under 5%, down from 12–18%.
What Will Get More Expensive (The 40% Bracket)
Not everything is cheaper. A new 40% GST slab is in effect for select “sin” or luxury products, making them significantly costlier:
- Tobacco products: pan masala, gutka, cigarettes, chewing tobacco, unmanufactured tobacco.
- Aerated/caffeinated beverages, including carbonated soft drinks like cola.
- Luxury vehicles, yachts, private aircraft (e.g., single-owner aircraft).
- Gambling and betting services, including casinos, lotteries, horse racing, and online gaming.
Notably, IPL (cricket match) tickets and high-value live event tickets may also carry much higher tax than before—potentially near the 40% level.
These steeper taxes are likely meant to reduce harmful consumption or luxury excesses—and help balance government revenues.
Why The Change? What It Means
- Simplification of the Tax Structure
By collapsing the GST slabs from four (5%, 12%, 18%, 28%) to just two (5% and 18%) plus the luxury 40% rate, the system becomes easier to understand, enforce, and comply with. - Support for Consumers & Businesses
Sharp cuts on daily-use items help ease inflationary pressure. Analysts say consumer prices might drop by up to 1.1 percentage points in inflation, depending on how much producers pass on savings.
Companies like Hindustan Unilever, Nestle, Godrej (in fast-moving consumer goods) and appliance makers like LG or Sony may see higher demand. Car brands such as Maruti, Yamaha, Hyundai could also benefit. - Revenue Impact
The government expects a revenue loss of ₹48,000 crore (~$5.5 billion), though this is lower than earlier projections. - Boost to Festive Sales & Domestic Demand
Slashed GST rates come just before Navratri and Diwali. With electronics, furniture, clothing, cars, and home appliances getting cheaper, retailers and automobile dealers could see a surge in sales. - Support for Farmers & Rural Economy
Cuts in GST on tractors, irrigation systems, fertilisers, and farm machinery ease input costs for farmers.
Everyday Examples: What This Means For You
Example 1: Grocery Shopping
Earlier, buying butter (12%), paneer (5%), biscuits (18%), ghee (12%) could make your total tax bill feel heavy. Now, each of these is just 5%—or even 0% for some dairy items. You save money every time you buy essentials.
Example 2: Home Electronics Upgrade
A TV that used to carry 28% GST now comes with only 18%. A new AC, dishwasher, fridge, or washing machine is similarly cheaper—prompting many to invest in home comfort just in time for holidays.
Example 3: Buying a Two-Wheeler or Car
If you’re eyeing a budget motorcycle (≤350 cc), your car in the sub-1,200 cc range, or a small hybrid, the GST drop to 18% makes these vehicles more affordable. Electric vehicle buyers get even better deals at 5% GST.
Example 4: Health & Insurance Expenses
Paying for a glucometer, medicines, baby feeding supplies, or even medical check-ups is less burdensome. Plus, life or health insurance becomes GST-free—a welcome saving during tough times.
Example 5: Entertainment & Leisure
Movie lovers pay just 5% GST on tickets under ₹100 (down from 12%), giving low-cost ticket buyers relief. But if you attend an IPL match or a big live concert, expect much steeper ticket prices—possibly double the GST you paid before.
Final Thoughts: GST 2.0 in a Nutshell
What’s changed:
- Simplified slabs: Replaced 12% and 28% with just 5% and 18%, plus a new 40% for luxury/sin goods.
- Goods that got cheaper: Everyday essentials, personal care, food, electronics, vehicles, insurance, healthcare, stationery, and more.
- Goods that cost more: Tobacco, soft drinks, luxury vehicles, gambling, and live-event entertainment.
- Launch date: These changes come into effect on September 22, 2025, aligning with the Navratri festival start.
Big impacts to expect:
- Lower prices on staple items and durable goods.
- Stimulated demand, especially during festivals and holiday shopping.
- Support for farmers, low-income households, and small buyers.
- Balanced revenue pressures via higher tax on non-essentials.
Overall, GST 2.0 is about balance. It eases the burden on middle-class households by slashing taxes on food, healthcare, and personal items. For a family earning Rs 50,000 a month, savings on groceries and meds could add up to Rs 1,000-2,000 monthly. That’s money for education or savings. Businesses benefit from simpler compliance—fewer slabs mean less paperwork and errors.
But challenges remain. States need to agree on revenue sharing, and some industries like automotive might see mixed impacts. Luxury sectors could slow down, but essentials should boom. Investors are watching closely, as Praveen Nijhara noted, to see if this strikes the right balance between relief and revenue.
In the end, these changes starting September 22, 2025, reflect a push for a fairer system. Whether you’re shopping for milk or dreaming of a new bike, understanding these shifts helps you plan better. Keep an eye on official notifications for any fine print, and remember, small savings today can lead to big differences tomorrow. If you’re a consumer, celebrate the cheaper essentials; if a business owner, adapt to the new simplicity. This is GST evolving to meet modern needs, one rate at a time.
