Introduction
Goods and Service Tax (GST) was introduced on 1st July 2017. From the date of its introduction the Act is being modified for the ease of the taxpayers and for the general public.
With the introduction GST 2.0 in the 56th meeting of the GST council held on 3rd September 2025, the council has simplified the tax rates into two slab structure. This two slab structure shall come into effect from 22nd September 2025.
What is GST 2.0?
GST 2.0 is the next generation reform package under the India’s Goods and Service Tax system. It focuses on restructuring the tax rates, the return filing process and reporting using automation and the real time data. This reform aims to make GST system more transparent, efficient and intelligent.
The Key objective of GST 2.0 is to:
- Simplify the registration and return filing process
- Refunds to be processed faster
- Easing the burden of business especially for MSMEs and startups.
Major Rate changes sector wise
The shift to two slab structure has the rates of 5% and 18% removing the rates of 12% and 28% which makes taxation more easier.
Food and Household sector
Reduction in GST rates of luxury products like AC, Dishwashers, and TVs. This rate cut increases affordability to consumers and also strengths India’s electronics manufacturing ecosystem.
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Ultra-High Temperature milk, Pre-packaged and labelled chena or paneer, all the Indian Breads | NIL |
| Packaged namkeens, Bhujia, Sauces, Pasta, Chocolates, Coffee, Preserved Meat etc. | 5% |
| Consumer durables | 18% |
Home Building & Materials
Rate cut in GST rates relating to construction materials will help to boost the construction/housing sector. This will increase the projects emerging in the construction sector and most of the people will have ownership of their houses.
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Cement | 18% |
| Marble/travertineblocks, Granite blocks, Sand-lime bricks | 5% |
| Bamboo flooring / joinery, Packing cases & pallets (wood) | 5% |
Automobile Sector
Reduction in rate of automobile sector will now encourage the people to have their own vehicles and allow them to travel at their convenience. The GST rates in the automobile sector were at a higher rate of 28%. The new rates are:
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Small cars, two-wheelers ≤350cc | 18% |
| Buses, trucks, three-wheelers, all auto parts | 18% |
Agriculture Sector
Rate reduction in agriculture sector will help the small farmers to invest in capital goods and helps to do their harvesting in a better manner with the advanced technologies.The new rates are:
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Tractors; tires and parts | 5% |
| Harvesters, threshers, sprinklers, drip irrigation, poultry & bee-keeping machines | 5% |
| Bio-pesticides and natural menthol | 5% |
Service Sector
Lower rates on hotel stays, gyms, salons, yoga services will reduce cost for the citizens and the citizens will invest more time in taking care of their personal health under the guidance of a coach. The new rates in service sector are:
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Hotel stays up to ₹7,500/day | 5% |
| Gyms, salons, barbers, yoga | 5% |
Toys, Sports and handicrafts
Lower rates in handicrafts will promote more artisans coming into this sector which preserves India’s culture and promote rural economic growth. The new rates are:
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Handicraft idols & statues | 5% |
| Paintings, sculptures | 5% |
| Wooden/metal/textile dolls & toys | 5% |
Education sector
Education is a must for everyone for the country to step forward in all sectors. The reduction in GST rates for education sector supports families and students lowering the cost of learning materials.
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| Geometry boxes, school cartons, trays: | 5% |
Medical sector
Reduced rates in medical sector improves access to health and support manufacturing in pharma sector. The new rates are:
| Product | New Rates (w.e.f 22-09-2025) |
|---|---|
| 33 life-saving drugs, diagnostic kits | 0% |
| Other medicines including Ayurveda, Unani, Homoeopathy | 5% |
| Spectacles and corrective goggles | 5% |
| Medical oxygen, thermometers, surgical instruments | 5% |
| Medical, dental, and veterinary devices | 5% |
Health & Life Insurance
In the health & life sector the following changes were made:
- GST has been exempted on premiums for individual life insurance whether term life, ULIP or endowment policies or reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage ,
- GST has been exempted on individual health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof to make insurance affordable.
Conclusion
Having reduced the GST rates in most of the consumer products, the Council and the Government have done their parts. It is upto the manufacturers and dealers to pass on the benefit of the reduction in rates to the general public so that the rationalization measures actually make sense.
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