GST Reforms 2025 India, What Gets Cheaper in GST 2025, GST Impact on Businesses, Corpzo GST AdvisoryThe Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, has announced a historic reform under GST 2.0, set to roll out from September 22, 2025. This move marks a significant simplification of the tax structure, aligning with the festive season to boost consumer demand and economic activity.

Key Changes in the GST Structure

The Council has approved a shift from the existing four-tier system (5%, 12%, 18%, 28%) to a streamlined two-slab structure: 5% and 18%, along with the introduction of a 40% slab for luxury and sin goods.

This reform aims to:

  • Simplify the tax system.
  • Reduce compliance burden.
  • Balance affordability for essential goods with higher taxation on luxury and harmful items.

What Becomes Cheaper?

Many essential goods and services have been shifted to the 5% slab or made tax-free. This is expected to reduce the financial burden on households.

1. Personal Care & Hygiene Products

  • Hair oil, shampoos, soaps, toothpaste, toothbrushes, shaving cream.

2. Household Goods & Packaged Foods

  • Bicycles, tableware, and kitchenware.
  • Packaged namkeens, instant foods, chocolates, coffee, ghee, butter, pasta, noodles.

3. Food Staples

  • UHT milk, roti, paratha, parotta, unpackaged paneer – exempt from GST.
  • Plant-based milk, soya milk – taxed at only 5%.

4. Appliances & Electronics

  • TVs, air conditioners, refrigerators, dishwashers moved from 28% → 18%.
  • Cement and batteries are uniformly taxed at 18%.

5. Medical Supplies

  • All medicines (other than nil-rated ones) and medical, veterinary, and surgical equipment at 5%.

6. Services

  • Salons, gyms, yoga centres at 5% (without Input Tax Credit), down from 18%.

7. Agricultural Machinery

  • Tractors, tyres, and spare parts reduced to 5%.

8. Insurance

  • Life and health insurance policies are completely exempt from GST—a move hailed as a "historic Diwali gift" to citizens.

What Gets Costlier?

To balance the revenue loss, the government has introduced a new 40% GST slab for luxury and harmful products.

1. Luxury & Sin Goods

  • Pan masala, gutkha, cigarettes, bidis.
  • Aerated drinks, caffeinated beverages.

2. High-End Vehicles & Lifestyle Products

  • Motorcycles above 350cc, luxury cars, yachts, and personal aircraft are now taxed at 40%.

3. Tobacco Products

  • Taxes linked directly to the retail sale price (RSP), further increasing consumer cost.

4. Coal & Energy Costs

  • GST on coal has been increased (rate to be notified), potentially raising electricity and energy costs.

5. Non-Essential Fancy Beverages

  • Certain premium non-alcoholic beverages shifted to the higher slab.

Economic & Market Impact

  • Boost to Consumption: With essentials becoming cheaper, consumer demand is expected to rise, particularly during the festive season.
  • GDP Growth: Economists predict a 100–120 basis point boost to GDP over the next 4–6 quarters.
  • Revenue Outlook: Estimated revenue loss of ₹48,000 crore ($5.5 billion), which is still lower than earlier projections.

Stock Market Reactions

  • FMCG stocks (ITC, HUL) gained up to 7%.
  • Automobile and electronics companies (Maruti Suzuki, Mahindra & Mahindra, Nestlé, Blue Star, Voltas) saw positive movement.
  • Restaurants benefited from reduced GST on packaged foods and beverages.

Conclusion

The GST 2.0 reform is a landmark in India’s tax regime—balancing affordability for the common man while imposing higher taxes on luxury and sin products. By aligning the implementation with the festive season, the government is aiming not only to ease household budgets but also to stimulate growth in key sectors of the economy.

This reform is expected to bring long-term benefits by simplifying tax compliance, boosting consumption, and creating a fairer taxation system.