New Gst Rates and Summary

September 4, 2025 by Team Instabizfilings

In a major change that will transform India's indirect tax system, the Goods and Services Tax (GST) Council has approved a big revision of the tax structure. This important reform starts on September 22, 2025. It will simplify the current four-tier system into a clearer two-rate structure. This change will make everyday essentials cheaper for regular people and make it easier for businesses to comply.

The New GST Structure: A Simplified Two-Slab System

The GST Council has simplified the previous tax rates of 5%, 12%, 18%, and 28% into a two-rate system.

5% GST: This rate now applies to essential and mass-consumption goods.
18% GST: This will be the standard rate for most consumer and industrial goods and services.
40% GST (Special Rate): A new, higher rate of 40% will be charged on super luxury and "sin" goods like high-end cars, yachts, and certain tobacco products. This aims to cover the revenue loss from tax cuts on essential items.

Key Changes

Most daily use products: Tax reduced to 5% (from 12% or 18%)—covers items such as hair oil, toilet soaps, toothpaste, shampoos, toothbrushes.
Beauty and wellness services (salons, gyms, yoga centres): GST cut from 18% with ITC to 5% without ITC.
Hotel rooms below Rs 7,500/night: GST rate reduced from 12% to 5%.
Three-wheelers: GST cut from 28% to 18%.
Essential food items: Many are now at the 5% slab; some still at nil (0% GST).
Health insurance: Tax has been reduced to 0% GST from 18%
Insurance : Insurance has been moved to 0% GST from 18%

Detailed List of New GST Rates

Category/Item	Previous GST	New GST Rate (from Sept 22, 2025)
Hair oil, soaps, toothpaste	12-18%	5%
Salons, gyms/yoga centres	18%	5%
Hotel rooms (< ₹7,500/night)	12%	5%
Three-wheelers	28%	18%
Major food items	12-18%	5%
Health Insurance	18%	0%
Super luxury/sin goods	28%+cess	40%
Insurance	0%	18%

Impact on the Common Man and Businesses

The new structure will help reduce taxation on everyday products and food that will become cheaper.
Smaller businesses and traders will find it easier with the reduced and simplified tax slabs, and this will enhance their working capital and business processes.
Tax rates on high-end luxury goods, sin goods, and selective items will increase, which will be able to offset the total decrease in revenue.

Implementation Timeline and Process

The new GST rates will start on September 22, 2025. However, the new 40% rate for some tobacco products will come into effect later, after the current loan obligations from the compensation cess are settled.

Conclusion

This GST reform marks an important step toward a simpler, more efficient, and friendly tax system. By lowering taxes on necessities, supporting key industries, and making compliance easier, India is set for strong economic growth. This decision shows the government's dedication to improving life for its citizens and making business easier for its enterprises.

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