NEW GST RATES NOTIFICATION ISSUED FOR GOODS – EFFECTIVE FROM 22ND SEPTEMBER.
Based on the recent 56th GST Council meeting, a major overhaul of the Goods and Services Tax (GST) regime is set to become effective from September 22, 2025.
Key Highlights of the GST Rate Changes:
- Simplified Tax Structure: The previous four-slab system (5%, 12%, 18%, and 28%) has been replaced with a more streamlined three-rate structure:
- 5%: For essential goods and services.
- 18%: A standard rate for most goods and services.
- 40%: A new “demerit” rate for luxury and “sin” goods.
- Reduced Rates on Daily Essentials: Many items previously in the 12% or 18% slabs have been moved to the lower 5% or Nil rate to benefit the common consumer. This includes:
- Personal Care: Hair oil, shampoo, toothpaste, toilet soap, and shaving cream.
- Food Products: Packaged food items like biscuits, namkeens, and some dairy products like butter and ghee.
- Household Items: Utensils, sewing machines, and bicycles.
- Healthcare: Essential medicines, medical-grade oxygen, diagnostic kits, and thermometers. Individual health and life insurance policies are now exempt (Nil rate).
- Rate Cuts for Consumer Durables and Automobiles: Several big-ticket items will see a reduction in tax, which is expected to boost consumer demand.
- Consumer Durables: Air conditioners, televisions (above 32″), and dishwashers will now be taxed at 18% instead of 28%.
- Automobiles: Small cars (petrol engines under 1200cc, diesel under 1500cc, and length under 4m) and motorcycles (up to 350cc) have moved from 28% to 18%. Cement has also been reduced from 28% to 18%.
- Increased Tax on Luxury/Sin Goods: A new 40% rate has been introduced for items like high-end cars, yachts, aerated beverages, and tobacco products (excluding those for which the old rates will continue to apply until a later notification).
Important Points to Note:
- Effective Date: The new rates are effective from September 22, 2025, for all goods and services, with the exception of certain tobacco products (pan masala, gutkha, cigarettes, etc.) where the existing rates will continue for now.
- Inventory and Pricing: The government has provided clarity on pricing for goods already in the supply chain. While re-labeling is not mandatory for existing stock, the new, lower prices must be honored at the retail level. This has caused some short-term sales slump as consumers wait for the new rates to take effect.
- Impact on Businesses: The reforms are aimed at simplifying the tax system and reducing compliance burdens for businesses, particularly MSMEs. However, some sectors like the premium apparel industry (clothing priced over ₹2,500) will see an increase in GST from 12% to 18%.