The restructured and rationalised tax regime is likely to lead to an estimated revenue loss of ₹47,700 crore.
Published Sep 03, 2025 | 11:50 PM ⚊ Updated Sep 03, 2025 | 11:50 PM
Union Finance Minister Nirmala Sitharaman said the changes on GST of all products, except sin goods, will be applicable from 22 September.
Synopsis: The GST Council meeting decided to slash or drop the GST on several items and move items to different categories of taxation to meet the aspirations of the middle-class, build industry confidence and support better business planning.
Most goods and services in India will have a two-tier tax structure with rates of five percent and 18 percent from 22 September.
The 56th meeting of the GST Council in New Delhi on Wednesday, 3 September, also added a new 40 percent slab for sin and luxury goods.
The restructured and rationalised tax regime is likely to lead to an estimated revenue loss of ₹47,700 crore. Structural reforms are introduced to ensure stability and predictability by providing long-term clarity on rates and policy direction to build industry confidence and support better business planning.
Union Finance Minister Nirmala Sitharaman, who chaired the meeting, said, “The changes on GST of all products except sin goods, will be applicable 22 September… Sin goods will continue at the existing rates of the GST and compensation cess, where applicable, till the loan and interest payment obligations under the compensation cess account are completely discharged.”
GST rate of 40 percent will be levied on pan masala, tobacco products, cigarettes, and aerated drinks containing added sugar.
Sitharaman said the Goods and Services Tax (GST) on 33 life-saving drugs and medicines has come down to zero from 12 percent.
The GST on medical-grade oxygen, diagnostic kits and reagents, glucometer, test strips, and corrective glasses has been slashed to 5 percent from 12 percent.
The council also decided to exempt individual life insurance policy (Life, ULIP, endowment, or reinsurance) from GST, which would slash the overall cost of buying policies. Excluding the premium from GST, currently pegged at 18 percent, will make it more affordable for the common man.
Among daily essentials, items such as hair oil, shampoo, toothpaste, and brushes, toilet soap, and shaving cream will cost less as the GST on them has been reduced to 5 percent from 18 percent, currently pegged at 18 percent,
Butter, ghee, cheese, dairy spreads, namkeens, bhujia, sauces, pasta, instant noodles, chocolate, coffee, preserved meat, utensils, feeding bottles, napkins for babies, and clinical diapers, too, will get cheaper.
Sitharaman said several items, such as ultra-high temperature milk, paneer, and all Indian breads, have been exempted from GST.
“Agricultural goods such as tractors, agricultural, horticultural, and forestry machines for soil preparation or cultivation, harvesting or threshing machines, including straw or fodder balers, grass or hay movers, composting machines, etc., are all coming down from 12 to five percent,” the Finance Minister said after the marathon meeting that lasted 10.5 hours.
Bicycles, cars (petrol and petrol hybrid, LPG, and CNG-powered) and motorcycles, too, will become more affordable as the council decided to bring the GST slab to 18 percent from 28 percent. However, the reduction applies only to cars not exceeding 1,200 CC and 4,000 mm). For diesel cars, the limit is 1,500 CC and 4,000 mm. Motorcycles up to 350 CC will get the benefit.
Buses, trucks, three-wheelers, and ambulances will also cost less. All automobile parts will now have a uniform rate of 18 percent.
Education-related stationery items will now carry zero GST. Electronic appliances such as air conditioners, television sets, monitors, projectors, and dishwashing machines will be taxed at 18 percent, down from the current 28 percent, to “meet middle-class aspirations”, the minister said.
Finance ministers of all states and Union Territories attended the meeting.
Earlier, Prime Minister Narendra Modi lauded the GST Council for bringing “the Next-Generation reforms in GST”.
In a post on X, he said the proposal, announced on Independence Day, is “aimed at ease of living for the common man and strengthening the economy.”
“Glad to state that the GST Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts and reforms, which will benefit the common man, farmers, MSMEs, middle-class, women, and youth. The wide-ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” he stated.
During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.
The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and…
— Narendra Modi (@narendramodi) September 3, 2025
