New GST reforms 2.0

As per the 56^th GST Council Meeting, India’s sweeping GST reform (GST 2.0), effective September 22, 2025, has reorganized tax slabs into more logical tiers—5% and 18%, with a newly added 40% “de-merit” rate for luxury and sin goods.

1. Milk Products & Essentials – Now 0% or 5%

UHT Milk, Paneer, Chena, Pizza Bread, Khakhra, Chapati/Roti — moved from 5% to zero tax.

Butter, Ghee, Cheese, Dairy Spreads — tax reduced from 12% to 5%.

2. Daily-Use FMCG Items – Now 5%

Products like hair oil, shampoo, toothpaste, soap, and other grooming items—earlier taxed at 18%—now attract only 5% GST.

3. Household Essentials & Kitchenware – Now 5% or 0%

Feeding bottles, kitchen utensils, toothbrushes, talcum powder, combs, pencils, notebooks, erasers, charts, etc., have had their rates cut from 12% (or higher) to 5% or even zero in many cases.

4. Medical Devices & Healthcare Items – Now 5% or 0%

Items such as thermometers, glucometers, test strips, medical oxygen, diagnostic kits, spectacles—previously at 12–18%—are now taxed at 5%.

Life and health insurance policies have been made tax-free (0%).

5. Electronics & Appliances – Now 18%

Air-conditioners, televisions, dishwashers, and other durable household goods—earlier at 28%—now attract 18% GST.

6. Automobiles & Two-Wheelers – Now 18%

Motorcycles (<350 cc) and small cars (≤1200 cc and ≤4000 mm) have seen their GST cut from 28% to 18%.

Similarly, auto parts, bicycles, and EV components now fall in the 18% bracket.

Conclusion

Under GST 2.0’s new structure, millions of consumers benefit from reduced rates on everyday essentials. Key products like UHT milk, packaged foods, toiletries, appliances, and small vehicles are now significantly cheaper—thanks to the shift into the 0%, 5%, or 18% slabs. Meanwhile, luxury and “sin” goods have been relegated to the higher 40% slab, helping ensure that relief is targeted where it matters most.