The new gst rates in India come into effect from September 22, 2025, and they simplify the tax system drastically – now just two main slabs of 5% and 18%, plus a new 40% slab for luxury and sin goods. This means many everyday items will get cheaper, while just a few high end or harmful goods will be taxed more.
What’s Actually Changing?
The new gst rates overhaul replaces the old four-tier system (5%, 12%, 18%, 28%) with a clean two-rate system: 5% and 18%, and a 40% slab for select sin and luxury items
- 5% rate becomes the new norm for essential and everyday stuff—snacks like biscuits, noodles, chocolates; household, personal care items like shampoo, toothpaste, soaps; foods including ghee, paneer, dried fruits; even renewable energy equipment and fertilizers.
- 18% rate now applies to most durables and appliances—TVs, ACs, fridges, washing machines, small cars and motorcycles under 350 cc, three-wheelers, buses, ambulances, and auto parts
- 40% rate for luxury/sin goods: tobacco, pan masala, gutkha, flavored drinks, high-end cars, private jets, yachts, and casinos.
Who Gets a Break—and Who Pays More?
- You pay less on everyday stuff: Most household staples grocery items, personal toiletries, bread, biscuits, dry fruits come down to 5%, and certain ultra‑essentials like UHT milk, paneer, roti, medicines, and life and health insurance are now completely tax-exempt (nil GST)
- Cheaper gadgets and cars: Electronics like phones, laptops, TVs, and small utility vehicles now attract 18% instead of 28%
- Luxury goods face a tax hike to 40% so things like premium cars, cigarettes, and flavored drinks cost noticeably more
Why This Matters—Simpler, Fair, and Timely
- Budget relief ahead of Diwali: The government calls it “GST 2.0” a timely gift to boost consumer spending during festival season.
- Simpler tax system: Cuts confusion and reduces paperwork, with just two main slabs for most goods.
- Inflation control and growth boost: Analysts expect retail inflation to ease by up to 1.1 percentage points, and GDP growth could benefit by 100–120 basis points.
- Stock market jump: Consumer and auto stocks surged after the announcement -a positive indicator.
Timing & What’s Still Waiting
- The New GST rates apply from September 22, 2025 – right at the start of Navratri.
- Tobacco and cess-taxed items (like gutkha, cigarettes, etc.) will continue under old rates and cess until existing compensation loans are cleared-no decision yet on when they’ll move to the new slabs.
Final Take- What You Should Know
- New GST rates are simpler, fairer, and more consumer-friendly.
- Everyday essentials drop to 5% or become tax-free.
- Durables and small vehicles get a tax cut to 18%.
- Luxury or harmful goods now taxed at 40%.
- Effective from September 22, so expect faster relief soon.
- Tobacco and related items wait for the next phase.
In short: the new gst rates overhaul slashes prices on most daily stuff, gives small vehicles and gadgets a tax cut, and hits luxury and harmful goods harder-just in time for festive season cheer!
