New GST Rates in India 2025: Complete Guide to What’s Cheaper and Costlier
The Goods and Services Tax (GST) in India has undergone one of its biggest reforms in 2025. The GST Council, in its 56th meeting held in September, introduced sweeping changes aimed at simplifying the tax system and boosting consumption. This article covers the new GST rates, their impact on essentials, luxury goods, travel, and the overall economy.
Major Changes in GST Structure
- The earlier four-tier structure (5%, 12%, 18%, 28%) has been reduced to a simpler two-tier system of 5% and 18%.
- A 40% slab has been introduced for luxury and sin goods such as tobacco, alcohol, and premium items.
- The changes will take effect from September 22, 2025, coinciding with the start of Navratri festivities.
Items That Get Cheaper
1. Daily Essentials and Household Products
- Food products like butter, cheese, ghee, biscuits, pasta, and cornflakes will now be taxed at 5%.
- Staple items including paneer, UHT milk, pizza bread, roti, and khakhra are now exempt from GST.
- Toiletries and household goods such as soaps, shampoos, toothpaste, kitchenware, bicycles, and combs will now fall under the 5% bracket.
- Stationery items including notebooks, erasers, pencils, and charts will now attract 0% GST.
- Medicines and medical equipment such as glucometers, oxygen, and corrective spectacles are taxed at 5% or exempt.
- Insurance premiums for life and health are now completely exempt from GST.
2. Electronics, Automobiles, and Appliances
- Large appliances like televisions, air conditioners, dishwashers, and refrigerators have dropped from 28% to 18%.
- Small cars, motorcycles under 350cc, and auto parts are now taxed at 18%.
- Electric vehicles remain at a concessional 5% GST rate.
- Cement, previously taxed at 28%, is now under the 18% slab.
3. Travel and Hospitality
- Hotels with room tariffs up to ₹7,500 will now attract only 5% GST. Premium hotels above this range continue at 18%.
- Restaurant meals are now taxed at 5%, compared to the earlier 12–18%.
- Air travel has become cheaper, with economy class tickets reduced to 5% and business class to 12%.
Items That Get Costlier
- Luxury and sin goods such as alcohol, high-end cars, and tobacco products will now attract the highest slab of 40%.
- Apparel priced above ₹2,500 has moved from 12% to 18%.
Economic Impact of the New GST Rates
- Inflation Control: Experts estimate inflation could ease by around 1.1 percentage points.
- Boost in Consumption: Lower tax on essentials, travel, and household goods is expected to drive festive season demand.
- Revenue Loss: The government may face a short-term revenue dip of about ₹48,000 crore, but this could reduce as higher consumption boosts collections.
- Industry Gains: FMCG, auto, appliances, travel, cement, and insurance sectors are among the biggest beneficiaries.
Summary of New GST Rates
| Category | Old Rate(s) | New Rate |
|---|---|---|
| Staples & dairy | 5–18% | 0% or 5% |
| Toiletries & kitchenware | 12–18% | 5% |
| Stationery | 5–12% | 0% |
| Medicines & insurance | 12–18% | 0–5% |
| Electronics & appliances | 28% | 18% |
| Small vehicles & parts | 18–28% | 18% |
| Electric vehicles | 5% | 5% |
| Cement | 28% | 18% |
| Hotels & restaurants | 12–18% | 5% / 18% |
| Flights (economy/business) | 12%, 18% | 5%, 12% |
| Apparel > ₹2,500 | 12% | 18% |
| Luxury & sin goods | 28% + cess | 40% |
Final Thoughts
The new GST rates in India are designed to simplify the tax system, encourage spending, and reduce the cost of living for the common man. Essentials, food products, travel, and medical expenses will become cheaper, giving relief to households. On the other hand, luxury and sin goods will face a higher tax burden.
This is a bold step towards making GST consumer-friendly and ensuring a balance between affordability for the masses and higher taxation on luxury consumption.
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