What are the new changes in GST 2025?
The Goods and Services Tax (GST) in India is undergoing significant reforms in 2025, referred to as "GST 2.0," following the 56th GST Council meeting held on September 3–4, 2025. These reforms aim to simplify the tax structure, reduce the tax burden on essential goods, and promote economic growth. Below is a comprehensive overview of the new changes effective from September 22, 2025, unless otherwise specified:
Key Structural Changes to GST Slabs
1. Simplified Tax Slabs:
The previous four-slab structure (5%, 12%, 18%, 28%) has been reduced to two main slabs: 5% (merit rate for essentials) and 18% (standard rate for most goods and services).
A new 40% demerit rate has been introduced for luxury and sin goods.
Special concessional rates of 0.25% (e.g., certain diamonds and precious stones) and 3% (e.g., gold and jewelry) are retained for specific items.[](https://www.thehindu.com/business/Economy/centre-proposes-fewer-gst-rates-only-5-18-to-remain-tax-on-common-use-items-slashed/article69937407.ece)[](https://blog.stockedge.com/new-gst-rules-2025/)
2. Elimination of 12% and 28% Slabs:
About 99 percent of goods that were previously subject to 12% tax will now be subject to the 5% slab.
About 90% of items previously taxed at 28% will shift to the 18% slab, making many goods more affordable.[](https://www.thehindu.com/business/Economy/centre-proposes-fewer-gst-rates-only-5-18-to-remain-tax-on-common-use-items-slashed/article69937407.ece)
3. End of Compensation Cess:
The Compensation Cess, previously levied on certain goods like tobacco and luxury vehicles, is being phased out. The cess is merged with the GST rate to maintain tax incidence on most goods, except for tobacco-related products, which will transition to new rates after loan and interest obligations are cleared.[](https://upstox.com/news/personal-finance/tax/gst-rate-cut-2025-faqs-live-updates-what-is-cheaper-costlier-new-gst-returns-and-registration-rules/liveblog-180671/)[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)
Rate Reductions and Exemptions
1. Items Now Exempt (0% GST):
Individual Health and Life Insurance: All individual health insurance policies (including family floater plans and senior citizen policies) and life insurance policies (term, ULIP, endowment) are now GST-free.[](https://timesofindia.indiatimes.com/business/india-business/gst-rate-cuts-from-september-22-all-you-need-to-know-about-new-tax-rates-for-items-75-faqs-answered/articleshow/123682611.cms)[](https://upstox.com/news/personal-finance/tax/gst-rate-cut-2025-faqs-live-updates-what-is-cheaper-costlier-new-gst-returns-and-registration-rules/liveblog-180671/)[](https://indianexpress.com/article/business/gst-council-approves-two-tier-tax-implemented-september-22-10228654/)
Basic Food Items: Milk, paneer, and Indian breads (previously at 5%) are now exempt.[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)
Educational Essentials: Exercise books, notebooks, maps, and charts are now GST-exempt.[](https://www.cashe.co.in/our-blog/gst-new-rate-list/)
Lifesaving Drugs: Previously taxed at 12%, these are now exempt to reduce healthcare costs.[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)
2. Items Moved to 5% GST:
Daily Essentials and FMCG: Packaged foods (e.g., namkeen, bhujiya, sauces, pasta, cornflakes, butter, ghee), drinking water (20-litre bottles), plant-based milk drinks, soya milk drinks, sugar confectionery, and personal care items (e.g., hair oil, shampoo, toothpaste, tooth powder) are reduced from 12% or 18% to 5%.[](https://upstox.com/news/personal-finance/tax/gst-rate-cut-2025-faqs-live-updates-what-is-cheaper-costlier-new-gst-returns-and-registration-rules/liveblog-180671/)[](https://www.cashe.co.in/our-blog/gst-new-rate-list/)[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)
Healthcare Items: Spectacles and goggles for vision correction (down from 28%), and most drugs/medicines (except those at 0%) are now at 5%.[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)
Other Goods: Feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture, combs, and millet flour (loose, with 70% millet composition under HS1901) are now taxed at 5%.[](https://cleartax.in/s/gst-rates)[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)
Services: Third-party insurance is now only 5% instead of 12% or 18% for services including health clubs, salons, barbers, fitness centers, and yoga centers, as well as for the transportation (₹7,500 per day). Some services, like salons, may not allow Input Tax Credit (ITC).[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)[](https://indianexpress.com/article/business/gst-council-approves-two-tier-tax-implemented-september-22-10228654/)[](https://taxguru.in/goods-and-service-tax/gst-2-0-update-2025-new-tax-slabs-complete-product-list.html)
3. Items Moved to 18% GST:
Automobiles: Small cars (below 1200cc), motorcycles (below 350cc), three-wheelers, ambulances, commercial vehicles, and auto parts are reduced from 28% to 18%.[](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2163555)[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)
Consumer Durables: Electronics like TVs, washing machines, air conditioners, dishwashers, and laptops are now taxed at 18% (down from 28%).[](https://www.cashe.co.in/our-blog/gst-new-rate-list/)[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)
Construction Materials: Cement is reduced from 28% to 18%.[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)
Other Goods: Coal (with merged cess, no additional burden), restaurant services, telecom services, financial services, and premium apparel remain or move to 18%.[](https://upstox.com/news/personal-finance/tax/gst-rate-cut-2025-faqs-live-updates-what-is-cheaper-costlier-new-gst-returns-and-registration-rules/liveblog-180671/)[](https://www.cashe.co.in/our-blog/gst-new-rate-list/)[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)
Items Now Taxed at 40% (Demerit Rate):
Sin Goods: Aerated waters, caffeinated beverages, carbonated beverages (e.g., Coca-Cola, Pepsi), and non-alcoholic beverages with added sugar or flavoring are now taxed at 40% (up from 28% or 18%).[](https://cleartax.in/s/gst-rates)[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)
Luxury Goods: Motorcycles above 350cc, high-end cars (above 1200cc and longer than 4000mm), yachts, helicopters, aircraft for personal use, and racing cars are taxed at 40%.[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)[](https://www.ndtv.com/india-news/gst-revamp-what-gets-cheaper-costlier-see-full-list-here-gst-council-meeting-news-rates-9213334)
Tobacco Products: Cigarettes, pan masala, gutka, zarda, unmanufactured tobacco, and bidis will remain at 28% GST plus Compensation Cess until loan obligations are cleared, after which they will move to 40%.[](https://timesofindia.indiatimes.com/business/india-business/gst-rate-cuts-from-september-22-all-you-need-to-know-about-new-tax-rates-for-items-75-faqs-answered/articleshow/123682611.cms)[](https://www.india-briefing.com/news/india-gst-reform-2025-rate-revisions-list-goods-39619.html/)[](https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03)
Administrative and Compliance Changes
1. Simplified Compliance:
Pre-filled GST Returns: To reduce paperwork and improve compliance efficiency.[](https://cleartax.in/s/next-generation-gst-reforms)[](https://www.businessoutreach.in/gst-reforms-2025-tax-slabs-benefits/)
Faster Refunds: A seven-day refund window for exporters and a simplified refund mechanism for inverted duty structures.[](https://upstox.com/news/personal-finance/tax/gst-rate-cut-2025-faqs-live-updates-what-is-cheaper-costlier-new-gst-returns-and-registration-rules/liveblog-180671/)[](https://www.businessoutreach.in/gst-reforms-2025-tax-slabs-benefits/)[](https://www.visionias.in/blog/current-affairs/gst-reform-2025-indias-two-slab-tax-revolution)
Easier Registration: Faster GST registration for low-risk businesses and mandatory biometric authentication for corporate entities (effective March 4, 2025).[](https://www.indiafilings.com/learn/gst-rule-changes-for-fy-2025-26/)[](https://www.visionias.in/blog/current-affairs/gst-reform-2025-indias-two-slab-tax-revolution)
Invoice Registration Portal (IRP): Mandatory for businesses with Annual Aggregate Turnover (AATO) above ₹10 crore to report B2B invoices within 30 days (effective April 1, 2025).[](https://cleartax.in/s/gst-changes-from-april-2025)
Two-Factor Authentication (2FA)/Multi-Factor Authentication (MFA): Mandatory for e-way bill and e-invoice systems for taxpayers with AATO above ₹20 crore (from January 1, 2025) and above ₹5 crore (from February 1, 2025).[](https://cleartax.in/s/gst-changes-from-april-2025)
2. Input Tax Credit (ITC) Rules:
Up until September 21, 2025, supplies manufactured at the prior rates are eligible for ITC. For shipments made on or after September 22, 2025, if the output supply is exempt or has a lower rate, the ITC might need to be reversed.[](https://timesofindia.indiatimes.com/business/india-business/gst-rate-cuts-from-september-22-all-you-need-to-know-about-new-tax-rates-for-items-75-faqs-answered/articleshow/123682611.cms)
Refunds for accumulated ITC due to inverted duty structures are clarified and expedited.[](https://timesofindia.indiatimes.com/business/india-business/gst-rate-cuts-from-september-22-all-you-need-to-know-about-new-tax-rates-for-items-75-faqs-answered/articleshow/123682611.cms)[](https://upstox.com/news/personal-finance/tax/gst-rate-cut-2025-faqs-live-updates-what-is-cheaper-costlier-new-gst-returns-and-registration-rules/liveblog-180671/)
3. Hotel Sector Reforms:
The "Declared Tariff" concept is abolished. Accommodation units charging more than ₹7,500/day attract 18% GST with full ITC.[](https://www.indiafilings.com/learn/gst-rule-changes-for-fy-2025-26/)
Specified premises definitions have been updated under CGST Rate Notification 5/2025.[](https://cleartax.in/s/gst-rates)
Sectoral and Economic Impacts
1. Consumer Benefits:
Lower taxes on essentials, healthcare, and consumer durables are expected to reduce household expenses, boost consumption, and increase purchasing power.[](https://cleartax.in/s/next-generation-gst-reforms)[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)
Specific sectors like FMCG, healthcare, and automobiles will see reduced costs, encouraging demand.[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)[](https://www.businessoutreach.in/gst-reforms-2025-tax-slabs-benefits/)
2. Business and MSME Support:
Simplified tax slabs and compliance reduce administrative burdens, especially for MSMEs.[](https://cleartax.in/s/next-generation-gst-reforms)[](https://blog.stockedge.com/new-gst-rules-2025/)
Correction of inverted duty structures frees up working capital and improves manufacturing competitiveness.[](https://indianexpress.com/article/business/gst-council-approves-two-tier-tax-implemented-september-22-10228654/)[](https://www.thehindu.com/business/Economy/centre-proposes-fewer-gst-rates-only-5-18-to-remain-tax-on-common-use-items-slashed/article69937407.ece)
3. Economic Goals:
The reforms align with India’s vision of a $5 trillion economy by boosting domestic consumption, supporting manufacturing, and enhancing global competitiveness.[](https://blog.stockedge.com/new-gst-rules-2025/)[](https://www.visionias.in/blog/current-affairs/gst-reform-2025-indias-two-slab-tax-revolution)
The focus on green energy (e.g., 5% GST on renewable energy equipment) and eco-friendly transport supports environmental objectives.[](https://taxguru.in/goods-and-service-tax/gst-reform-2025-tax-slabs-sectors.html)
Implementation Timeline
Most rate changes for goods and services (except tobacco-related products) will take effect on September 22, 2025, coinciding with the start of Navratri.[](https://timesofindia.indiatimes.com/business/india-business/gst-rate-cuts-from-september-22-all-you-need-to-know-about-new-tax-rates-for-items-75-faqs-answered/articleshow/123682611.cms)[](https://indianexpress.com/article/business/gst-council-approves-two-tier-tax-implemented-september-22-10228654/)
Tobacco-related products will transition to new rates after compensation cess obligations are cleared, to be notified later.[](https://timesofindia.indiatimes.com/business/india-business/gst-rate-cuts-from-september-22-all-you-need-to-know-about-new-tax-rates-for-items-75-faqs-answered/articleshow/123682611.cms)[](https://www.india-briefing.com/news/india-gst-reform-2025-rate-revisions-list-goods-39619.html/)
Administrative changes, such as biometric authentication and IRP compliance, are effective from April 1, 2025, with phased rollouts for 2FA/MFA starting January 1, 2025.[](https://cleartax.in/s/gst-changes-from-april-2025)[](https://www.indiafilings.com/learn/gst-rule-changes-for-fy-2025-26/)
Additional Notes
The GST Council, chaired by Finance Minister Nirmala Sitharaman, has emphasized consumer relief, farmer benefits, and support for labor-intensive industries.[](https://indianexpress.com/article/business/gst-council-approves-two-tier-tax-implemented-september-22-10228654/)
These reforms address long-standing issues like inverted duty structures and complex compliance, aiming for a “One Nation, One Tax” framework.[](https://www.businessoutreach.in/gst-reforms-2025-tax-slabs-benefits/)[](https://www.visionias.in/blog/current-affairs/gst-reform-2025-indias-two-slab-tax-revolution)
For detailed item-wise GST rates or further clarifications, refer to the Central Board of Indirect Taxes and Customs (CBIC) website or notifications.[](https://www.india-briefing.com/news/india-gst-reform-2025-rate-revisions-list-goods-39619.html/)[](https://cbic-gst.gov.in/gst-goods-services-rates.html)
These changes represent the most significant overhaul of India’s GST system since its introduction in 2017, designed to make taxation simpler, fairer, and more growth-oriented.[](https://cleartax.in/s/next-generation-gst-reforms)[](https://blog.stockedge.com/new-gst-rules-2025/)[](https://www.visionias.in/blog/current-affairs/gst-reform-2025-indias-two-slab-tax-revolution)
If you need a specific list of items under each slab or further details on compliance changes, please let me know!