On 3 September, the GST Council announced India’s biggest tax reform yet. The four old slabs are gone, replaced by just two: 5% and 18%. We simplify the GST reset and its impact across categories.

Essentials get cheaper Daily-use items like shampoo, soap, toothpaste, talcum powder, face powder, and hair oil will now be taxed at just 5%, instead of 12–18% earlier.

Zero-GST zone Bread, milk, and paneer will now have no GST. The same applies to 33 life-saving medicines, including some used for cancer treatment.

Insurance relief Health and life insurance premiums will no longer be taxed. Earlier, they carried a 12% GST. This means lower costs for families buying protection.

Electronics at lower rates Air conditioners, televisions above 32 inches, and dishwashers will now be taxed at 18% instead of 28%. Motorcycles under 350cc also shift to the 18% slab.

Affordable mobility Small cars (under 1200cc petrol and 1500cc diesel) and CNG/LPG vehicles now attract 18% GST instead of 28%. Electric vehicles remain at just 5%

Boost for housing Cement has dropped from 28% GST to 18%. This cut is expected to bring down construction costs and make housing more affordable.

Luxury and sin goods at 40% High-end items will now face the steepest tax. Racing cars, large vehicles, yachts, private aircraft, aerated drinks, tobacco, and cigarettes are taxed at 40%. Tobacco and cigarettes will continue to have extra taxes added, but the total tax on them stays at 40%.

Cheaper vs costlier Families will spend less on essentials, housing, and insurance under the new GST rates. 1. Coal will now be taxed at 18% instead of 5%. 2. Clothes above ₹2,500 will be taxed at 18% instead of 12%. 3. Soft drinks such as Coca-Cola and Pepsi will rise from 28% to 40%. 4. Other non-alcoholic beverages will also move up to 40%.

Beyond tax cuts Other reforms include faster small-business registration, quicker refunds, and the rollout of the GST Appellate Tribunal later this year.

The new GST structure takes effect on 22 September 2025, just before the festive season.