On 3 September 2025, at the momentous 56th meeting of India’s GST Council—chaired by Finance Minister Nirmala Sitharaman—a landmark decision was taken to overhaul the nation’s indirect tax structure. In a bid to rationalise complexity, the four-tier GST system was streamlined into just two rates: a merit rate of 5 per cent and a standard rate of 18 per cent, replacing the erstwhile 12 per cent and 28 per cent slabs. A separate 40 per cent demerit rate was retained for sin and super-luxury goods. This sweeping reform, branded “GST 2.0”, is set to take effect from 22 September 2025, coinciding with the onset of Navratri .
The essence of the reform is succinct: numerous everyday goods will now attract reduced GST of 5 per cent, while a host of standard items—once under 28 per cent—will shift to the 18 per cent slab. The move is designed to ease financial burdens on consumers, bolster spending power ahead of the festive season, and simplify compliance procedures.
A broad spectrum of widely used goods spanning food, personal care, household items and essentials have been reclassified into the 5 per cent slab. Notably:
Dairy & Confectionery
Products such as condensed milk, butter, ghee, butter oil, cheese, dairy spreads, formerly taxed at 12 per cent, are now at 5 per cent . Sweet treats including chocolates, cocoa butter, sugar confectionery and pastries, cakes, biscuits, wafers have likewise seen the GST reduced to 5 per cent .
Baked & Processed Foods
Pasta, noodles, corn flakes, malt-extract foods, jams, jellies, sauces, pickles, soups—all now taxed at 5 per cent . Pre-packaged staples such as pizza bread, khakhra, chapati, roti have moved from 5 per cent to nil GST, making them entirely tax-exempt .
Snacks & Beverages
Everyday snack items like namkeens, bhujia, mixtures are now at 5 per cent . Similarly, fruit juices, tender coconut water, plant-based milk (e.g., soya milk drinks) have been placed in the 5 per cent bracket, down from 12–18 per cent .
Personal Care & Daily Hygiene
Essential items such as hair oil, shampoo, talcum powder, face powder, toilet soap bars (non-industrial), along with toothpaste, toothbrushes, dental floss, shaving creams, after-shave lotions have all seen their GST reduced to 5 per cent .
Household Articles & Utensils
Everyday household essentials—including tableware, kitchenware, umbrellas, erasers, feeding bottles and their nipples, plastic beads—have been moved to the 5 per cent tax rate .
Stationery & Education
Items integral to education—pencils, sharpeners, exercise books, notebooks, maps, globes, charts—have been either reduced to nil or significantly eased in GST burden .
Insurance
All individual life and health insurance policies have been exempted from GST, effectively moving to 0 per cent .
Healthcare & Medical
A wide array of healthcare products and equipment—diagnostic kits, reagents, glucometers, medical-grade oxygen, surgical gloves, medical devices, as well as many medicines and speciality drugs—have been downgraded to the 5 per cent rate or made nil‐rated .
Agriculture & Renewables
Products related to farming and sustainability—tractors, agricultural machinery, sprinklers, composting machines, bio-pesticides, renewable energy components, manmade yarn and fibres—have been shifted to 5 per cent .
Handicrafts & Leather
Traditional and artisanal goods, including handicrafts, carved art, leather accessories and further-processed leathers, now attract the 5 per cent GST .
What Moves to the 18 Per Cent GST Bracket?
Several categories, previously tax-heavy under 28 per cent, are now considerably more affordable under the 18 per cent slab:
Consumer Durables & Electronics
Items like air conditioners, dishwashers, televisions (LED, LCD, monitors, projectors) have been shifted down to 18 per cent .
Small Automobiles & Two-Wheelers
Small cars—petrol up to 1,200 cc or diesel up to 1,500 cc with lengths under 4 metres—along with motorcycles up to 350 cc, three-wheelers, buses, trucks, ambulances, and all auto parts have all moved into the 18 per cent slab .
Building & Construction
Essential materials like cement, as well as various board products, are now subject to 18 per cent GST .
Tyres & Other Vehicle Components
Most tyres (except special categories) have seen their GST reduced from 28 per cent to 18 per cent .
The GST restructuring signals a seismic shift in India’s indirect tax paradigm. By shifting a vast range of everyday essentials to 5 per cent GST, the reform offers tangible financial relief to consumers, especially in the lead-up to Diwali. Simultaneously, the move of durable goods and small vehicles to 18 per cent balances affordability with revenue needs, while drastically simplifying compliance.
Industry analysts anticipate this reform will enhance demand across FMCG, electronics, automotive, and built environment sectors—helping companies such as Hindustan Unilever, Nestlé, Maruti Suzuki, LG, Maruti, Sony and others to benefit in the months ahead .
The reform is also projected to deliver macroeconomic uplift—lower inflation, stronger consumption, and improved GST administration efficiency—and is anticipated to contribute up to 100–120 basis points to GDP growth over the coming four to six quarters .
At a Glance: Items Made Cheaper Under GST 2.0
Now at 5 per cent: Condensed milk, butter, cheese, pasta, biscuits, cakes, snacks, sauces, jams, hair oil, shampoo, toothpaste, toothbrushes, feeding bottle nipples, tableware, umbrellas, erasers, notebooks, maps, life and health insurance, medical devices, farming equipment, handicrafts, leather goods.
Now at 18 per cent: Air conditioners, dishwashers, televisions, small cars, motorcycles ≤ 350 cc, three-wheelers, auto parts, buses, trucks, ambulances, cement, tyres.
These reductions, effective from 22 September 2025, represent a bold pivot towards affordability, transparency, and simplified administration. The measure is clearly designed to deliver immediate relief to households and boost economic momentum heading into the festive season.
Written by- Akash Paul
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