New Delhi, Sept 4: In a sweeping overhaul of India’s indirect tax regime, the GST Council on Wednesday approved a new two-rate structure of 5% and 18%, replacing the current four slabs of 5%, 12%, 18% and 28%. A special 40% slab has been created for luxury goods such as high-end cars, yachts, aircraft and sin products like tobacco and carbonated beverages.
The new rates, effective September 22, aim to boost domestic consumption and cushion the economic blow of recent US tariffs on Indian goods.
What Gets Cheaper
• Food & Beverages: Chapatis, paranthas, paneer, UHT milk, pizza bread and khakra to attract nil tax. Essentials like butter, ghee, dry fruits, jam, biscuits, cereals and ice cream move to 5% from 18%. Plant-based and soya milk drinks also cut to 5%.
• Household Items: Toothpaste, shampoo, soaps, toothbrushes, kitchenware, feeding bottles and bicycles down to 5% from 12–18%.
• Appliances: ACs, dishwashers, and TVs shift to 18% from 28%.
• Stationery: Pencils, crayons, notebooks and maps exempt from tax. Erasers taxed at nil.
• Textiles & Footwear: Reduced to 5% from 12%.
• Healthcare: Life-saving drugs, diagnostic kits, oxygen, glucometers and spectacles reduced to 5% or nil.
• Insurance: Life and health insurance policies will now attract nil GST.
• Travel: Economy class tickets and hotel tariffs up to ₹7,500 will be taxed at just 5%.
• Vehicles: Motorcycles under 350cc and small hybrid cars down to 18% from 28%; EVs continue at 5%; auto components reduced to 18%.
• Construction: Cement to fall to 18% from 28%.
• Agriculture: Tractors, irrigation equipment, fertiliser inputs, micronutrients and biopesticides cut to 5% from 12–18%.
What Gets Costlier
• Beverages: Aerated drinks, caffeinated beverages, and other sugar-based non-alcoholic drinks will attract a steep 40% GST (up from 18–28%).
• Vehicles: High-end cars above 1,200 cc, motorcycles above 350 cc, yachts and private aircraft will now fall under the 40% slab.
• Tobacco: Cigarettes, gutkha and other tobacco products will continue under the cess regime but will eventually move to the 40% GST slab after cess repayment ends.
With this restructuring, the Centre aims to make essential goods cheaper for households, while keeping luxury and harmful products in the highest tax bracket.
