New Delhi, September 3, 2025 – A landmark GST reform for businesses and consumers.

What’s Changing?

The GST Council has approved a new two‑tier structure, eliminating 12% and 28% tax slabs. Only 5% and 18% remain for most goods and services. Essential items such as ghee, packaged foods, and nuts move to 5%, while consumer durables like TVs, ACs, and small cars move to 18%.

Special Tax on “Sin” and Luxury Goods

A 40% sin‑goods tax applies to cigarettes, luxury cars, and carbonated drinks, balancing revenue needs while discouraging harmful consumption.

Why the Change?

The reform simplifies taxation, reduces consumer prices, and boosts economic activity. A clearer structure also makes compliance easier for businesses.

Implementation Timeline

The two‑tier GST structure will roll out from September 22, 2025, ahead of the Navratri festival season.

Concerns & State-Level Considerations

Some states fear revenue shortfalls. Kerala, West Bengal, and Tamil Nadu have demanded a compensation mechanism to offset losses.

FAQs

Why did India move to only two GST slabs?

To reduce complexity, cut costs for consumers, and encourage consumption by making taxation simpler.

Which items will now fall under the 5% slab?

Daily essentials such as packaged food, nuts, ghee, toothpaste, and shampoo.

What goods are taxed at 18% now?

Durable goods like ACs, TVs, and small cars.

What is the 40% sin‑goods slab?

It targets luxury and harmful products like high‑end cars, cigarettes, and fizzy drinks.

When does the new GST structure come into effect?

From September 22, 2025.

Will states lose revenue due to this reform?

Yes, some states have raised concerns and requested compensation mechanisms.