" GST Reforms 2025 : Complete List of Products Under 5%, 18% and 40% Slabs : Nirmala Sitharaman GST Announcement 3 September 2025 "
New Delhi, September 3, 2025 – India’s indirect tax
regime is set for a historic shift. The GST Council meeting highlights
confirmed the rollout of a simplified dual GST slab system, replacing
the previous four-tier structure.
From September 22, 2025, the country will operate
with just three slabs:
- 5%
(lower slab) for essential and mass-consumption goods
- 18%
(standard slab) for most products and services
- 40%
(premium slab) for luxury and demerit goods like tobacco and high-end
vehicles
These new GST rates in India are designed to simplify
compliance, reduce classification disputes, and make essentials cheaper for
households.
TIMELINE OF GST REFORMS 2025
- September
3, 2025 – Announcement of reforms at GST Council meeting.
- September
22, 2025 – Dual GST slab system (5%, 18%, 40%) comes into force.
- October
2025 – Review planned for insurance, EVs, and renewable energy.
KEY ANNOUNCEMENTS FROM THE GST COUNCIL MEETING
- Introduction
of 5% and 18% Slabs
- Items
of daily consumption such as packaged foods, biscuits, soaps, and
personal care products will now attract 5% GST.
- A
broad range of products and services including clothing, electronics, and
household goods will be taxed at 18% GST.
- Elimination
of 12% and 28% Categories
- The 12%
GST rate has been scrapped, and goods previously taxed here (like
certain FMCG items) will now move to 5% GST.
- The 28%
GST rate is eliminated, and most items under this band (appliances,
televisions, air conditioners) shift to 18% GST.
- Luxury
and Sin Goods Moved to 40%
- Cigarettes,
tobacco products, premium SUVs, and imported luxury goods will now be
taxed at 40% GST.
- This
ensures government revenues are protected while essentials remain
affordable.
- Implementation
Timeline
- The
new structure will take effect on September 22, 2025, just before
the festive shopping season.
SECTOR-WISE IMPACT OF NEW GST RATES IN INDIA
- FMCG
Sector (5% GST)
- Soaps,
biscuits, toothpaste, packaged food, cosmetics → reduced from 12% to
5%.
- Households
will save more on daily essentials.
- Electronics
and Durables (18% GST)
- Televisions,
refrigerators, washing machines, and air conditioners → reduced from
28% to 18%.
- This
10% reduction is expected to boost festive season sales.
- Automobiles
(18% & 40% GST)
- Mid-range
cars, scooters, and two-wheelers → 18% GST.
- Luxury
cars and SUVs → 40% GST (up from 28% previously).
- Insurance
and Services (18% GST)
- Standard
insurance premiums and financial services remain under 18% GST.
- Possible
revisions expected in future council sessions.
- E-Commerce
and Retail (5% & 18% GST)
- Online
sellers and offline retailers will now classify goods under only two
slabs – 5% for essentials and 18% for others.
- This
simplifies GST filings and reduces disputes.
BENEFITS OF GST REFORMS 2025
- Simplified
Compliance: Only three slabs (5%, 18%, 40%) instead of four.
- Consumer
Relief: Lower rates on essentials and household products mean higher
savings.
- Demand
Boost: Reduction from 28% to 18% makes electronics and automobiles
more attractive.
- Ease
of Doing Business: Less paperwork and fewer classification disputes.
- Revenue
Loss Risk: With the shift from 28% and 12% to lower slabs, states may
lose significant revenues.
- Need
for Compensation: States are asking for extended central support.
- Short
Adjustment Period: Businesses have only three weeks to transition to
new systems.
TAX CHANGES FOR CONSUMERS
What Gets Cheaper (5% or 18% GST):
- FMCG
items like soaps, biscuits, toothpaste → 12% ➝
5%
- Packaged
food, cosmetics, and personal care → 12% ➝
5%
- Electronics
like ACs, TVs, refrigerators → 28% ➝
18%
- Mid-range
cars, scooters → 28% ➝ 18%
What Stays Expensive or Becomes Costlier (40% GST):
- Luxury
cars and SUVs → 28% ➝ 40%
- Cigarettes
and tobacco products → 28% ➝ 40%
- Imported
luxury goods → 28% ➝ 40%
WHY THE NEW GST RATES IN INDIA MATTER
The GST reforms 2025 are designed to:
- Align
India’s tax model with global practices.
- Make
the system easy for businesses and consumers.
- Reduce
disputes over product classification.
- Support
small traders and e-commerce platforms by lowering compliance costs.
For consumers, moving essentials to 5% GST means
bigger savings in monthly budgets. For businesses, consolidation into 5% and
18% slabs simplifies accounting and boosts transparency.
SUMMARY
The dual GST slab system is one of the most impactful
economic decisions of the decade. By cutting rates for essentials and consumer
durables, the government has ensured immediate benefits for households. At the
same time, higher taxation on luxury and sin goods through the 40% GST slab
will safeguard state revenues.
While states remain cautious about potential shortfalls,
consumers and businesses can expect relief and clarity. As new GST rates in
India take effect from September 22, 2025, this reform is expected to boost
demand, streamline compliance, and make the tax system more transparent.
For citizens, the math is simple: 5% GST for essentials,
18% GST for most goods and services, and 40% GST for luxuries.
