Quick AI Summary
India’s GST structure was dramatically simplified in September 2025, reducing from four slabs to just three main rates: 5%, 18%, and 40%. Most daily essentials remain at 0% or moved to 5%, making life more affordable.
- Cheaper: Health insurance (now 0%), small cars, ACs, TVs (now 18%)
- Costlier: Luxury cars, tobacco, aerated drinks (now 40%)
- Effective Date: September 22, 2025
Table of Contents
India’s Goods and Services Tax (GST) regime underwent its biggest overhaul in September 2025, bringing a new, much-simplified GST rate structure with a focus on easing compliance and daily costs for consumers and businesses. The GST Council has slashed the old four-slabs system to just three main slabs: 5%, 18%, and a new 40% “de-merit” rate for luxury and sin goods. Here’s a comprehensive, latest, and fully sourced breakdown of the new GST rates in effect from September 22, 2025.
New GST Structure: Effective September 22, 2025
| GST Rate | Applies To |
|---|---|
| 0% (Exempt) | Daily essentials (milk, bread, fresh fruit/veg), health/life insurance, exercise books, maps |
| 5% | Packaged food, medicines, basic household, footwear, stationery, insurance, hotel rooms <₹7,500, agriculture machinery, most clothing, small vehicles under 1200cc, bikes below 350cc, cement, tableware/kitchenware, restaurant services |
| 18% | Electronics (TVs, fridges, washing machines, laptops), telecom, most financial and business services, capital goods, motorcycles/cars above threshold, appliances, cement |
| 40% (De-merit) | Luxury cars, premium bikes, tobacco/sin goods (tobacco, pan masala, cigarettes), aerated/sugary beverages, personal yachts/aircraft, casinos, gaming, race club/leisure services |
Note: The 40% “de-merit” rate replaces the old 28% + cess on a range of luxury/sin goods. Current GST rates (especially on tobacco-related products) remain until all outstanding compensation cess loans are repaid.
What’s Cheaper, What’s Costlier (2025 GST Revision)
| Category | Old GST Rate | New GST Rate | Impact |
|---|---|---|---|
| Hair oil, shampoo | 18% | 5% | Cheaper |
| Butter, ghee, cheese | 12% | 5% | Cheaper |
| Health/life insurance | 18% | 0% (Exempt) | Much cheaper |
| AC, TV, refrigerator | 28% | 18% | Cheaper |
| Small cars <1200cc | 28% | 18% | Cheaper |
| Cement | 28% | 18% | Cheaper |
| Hotel rooms <₹7,500 | 12% | 5% | Cheaper |
| Luxury/premium cars | 28% + cess | 40% | Costlier |
| Tobacco, pan masala | 28% + cess | 40% | Costlier |
| Aerated beverages | 28% | 40% | Costlier |
Essentials like fresh groceries, milk, curd remain at 0%. Many services (telecom, banking, education, restaurants) now unify at 18%.
Key Highlights of the 2025 GST Reform
- Major rate decrease on essential and daily-use items (biggest relief: food, hygiene/health, housing, and insurance).
- Luxury/sin goods placed at highest 40% slab; government targets fairness and health incentives.
- Simple two-slab system plus “de-merit” slab eliminates most 12%/28% confusion, targeting compliance and boosting domestic demand.
- Effective Date: All new rates (except tobacco/sin goods, which await final loan settlement) start Sept 22, 2025. Refund system improved for inverted duty (90% provisional within a week).
Complete Comparison: Old vs New GST Rate Table
| Item/Service | Old GST Rate | New GST Rate |
|---|---|---|
| Fresh food/essentials | 0% / 5% | 0% / 5% |
| Personal health/life insurance | 18% | 0% (exempt) |
| Packaged food, footwear | 5% / 12% | 5% |
| Tableware, kitchenware | 12% | 5% |
| AC, TV, refrigerators | 28% | 18% |
| Small cars, bikes (<350cc) | 28% | 18% |
| Hotel rooms <₹7,500 | 12% | 5% |
| Tractors, agri machinery | 12% | 5% |
| Aerated/caffeinated drinks | 28% | 40% |
| Luxury/premium cars | 28% + cess | 40% |
| Tobacco, sin goods | 28% + cess | 40%* |
*Will apply after compensation cess loans are paid off; current rates (incl. cess) continue for now.
FAQs on New GST Rates (2025)
When do the new GST rates apply?
Are daily essentials cheaper?
What’s the new highest GST rate?
What are the main GST slabs now?
Which items are newly exempt?
Is GST return filing easier?
The GST overhaul of 2025 delivers real relief and clarity, lowering taxes on essentials while focusing revenue efforts on luxury consumption and health priorities. Always verify current rates before billing, as the government promises regular online updates and helplines for transition support.
