The Goods and Services Tax (GST) Council on Wednesday approved a complete overhaul of India’s tax consumption tax since its launch in 2017, slashing duties on household essentials, medicines, small cars and appliances and affecting everything from toothpaste and insurance to tractors and cement. The 56th meeting of the GST Council, chaired by Union Finance Minister Smt. Nirmala Sitharaman has now approved Next-Gen GST reforms, with focus on improving the lives of the common man and ensuring ease of doing business for all, including small traders and businessmen. The council approved the rate overhaul by limiting slabs from the current four slabs – 5, 12, 18 and 28 per cent – to the two-rate structure of 5 per cent and 18 per cent. A special 40 per cent slab is, however, proposed for a select few items such as high-end cars, tobacco and cigarettes.
What is the Goods and Services Tax (GST)?
The goods and services tax also known as GST is a type of indirect tax that is applied on goods and services. It was passed in the parliament in 2017 and came into force on 1st July, 2017. This tax is included in the final price on the commodities purchased and bought by customers. It is a comprehensive, multi-stage, destination-based tax system designed to replace multiple indirect taxes levied by both the central and state governments in many countries, including India. Businesses collect the GST from customers and remit it to the government.
What gets cheap and what are the tax slab Rates on it?
The new two slab tax will make food and beverages cheaper. Many everyday essentials will become cheap, which will benefit the common man. Items like bread, pre-packaged and labelled chenna or paneer, ultra-high temperature milk will have NIL rates. Under the food section ghee, butter, cheese, dairy products, pre-packaged namkeens, bhujia, mixtures, Sauces, Pasta, Chocolates, Coffee, Preserved Meat too will be at a rate of 5% instead of 12% or 18% as previous slabs.
Whereas, household goods like shampoo, soaps, hair oil, toothpaste, shaving cream, tooth brushes will get tax rates from 18% to 5%.
The construction and housing sector is also set to benefit from lower taxes. Cement will now be taxed at 18% instead of 28%, while materials like marble, granite, and sand-lime bricks drop to 5% from 12%. Bamboo flooring, wooden pallets, and packing cases have also been moved to the 5% slab. These changes are expected to make homes more affordable, boost infrastructure development, and generate new jobs in real estate and construction.
In the automobile sector, small cars, two-wheelers (≤350cc), buses, trucks, three-wheelers, and auto parts will now be taxed at 18% instead of 28%.
Agriculture too receives a big push with cheaper machinery and farm inputs. Tractors, which were earlier taxed at 12%, will now attract only 5% GST, while tractor tires and parts drop from 18% to 5%. Other equipment like harvesters, threshers, sprinklers, drip irrigation systems, and poultry/bee-keeping machinery have been reduced to 5% from 12%. Bio-pesticides and natural menthol too will now fall under the 5% slab, helping farmers cut costs and encouraging sustainable farming practices.
While many enjoy lifestyle and personal care services, there has been a lower GST on hotel stays, salons, gyms and yoga services. This will reduce the pricey services and will make wellness affordable for the common people. Whereas for people who enjoy hotel stays or planning vacations, they no longer need to worry about the staying costs as hotels priced up to Rs. 7500 per day will now attract a 5% GST instead of 12%. Similarly gyms and salons, barbers and yoga services will see a reduction in GST from 18% to 5%.
In the textile sector, the government has fixed the inverted duty structure, improving the competitiveness of exports. GST on man-made fibre has been reduced from 18% to 5%, while man-made yarn has dropped from 12% to 5%, bringing relief to the industry.
The handicrafts sector will also benefit from lower tax rates. GST on idols, statues, paintings, sculptures, and wooden, metal, or textile dolls and toys has been cut from 12% to 5%, a move that will support artisans, preserve cultural heritage, and boost rural livelihoods.
Education has been made more affordable as essential learning materials such as exercise books, erasers, pencils, crayons, and sharpeners have been exempted from GST, moving to a 0% rate. Items like geometry boxes, school cartons, and trays have also seen a reduction from 12% to 5%, directly cutting down costs for students and families.
Healthcare has received a major boost with reduced GST on medicines and medical devices. Thirty-three life-saving drugs and diagnostic kits have been brought down from 12% to 0%, while other medicines, including Ayurveda, Unani, and Homoeopathy, now attract only 5%. The GST on spectacles and corrective goggles has been slashed from 28% to 5%, and items like medical oxygen, thermometers, surgical instruments, and medical, dental, and veterinary devices have all been reduced to 5% from earlier slabs of 12–18%.
Additionally, GST exemptions on premiums for individual life insurance, health insurance, floater plans, and senior citizen policies will expand financial protection and support the government’s vision of Mission Insurance for All by 2047.
What gets costlier and what is the special rate on this?
40% “de-merit” slab — Introduced for select luxury and sin goods (e.g., tobacco, high-end vehicles, aerated drinks).
Sin and luxury goods: Tobacco products, pan masala, aerated drinks, sugary beverages, premium vehicles and casinos now taxed at 40% (merging compensation cess into the slab) Some non-alcoholic yet unhealthy drinks also jump to 40%.
How Will the GST Reforms Help the Middle Class?
The recently announced GST reforms are expected to provide direct relief to the common man, farmers, MSMEs, women, youth, and middle-class families. By slashing rates and reducing the number of GST slabs, the government aims to lower the tax burden on essential goods and everyday items.
For businesses, especially small traders and MSMEs, the reforms promise easier compliance through automated refunds and a streamlined registration process. These changes are also set to unlock blocked working capital, giving enterprises more breathing space to grow and sustain operations.
The GST overhaul marks a significant step toward simplifying India’s tax system. With reduced rates on essentials and a friendlier business environment, the reforms are positioned to bring tangible benefits to households and businesses alike, reinforcing the government’s vision of ease of living and ease of doing business.
