GST Rate Changes 2025: Confused About Changes? Every FAQ Answered Ahead Of September 22 Rollout

GST Rate Changes 2025: The 56th GST Council meeting has brought major reforms to India’s tax structure. Starting from 22nd September 2025, new GST rates will apply to goods and services that touch almost every part of daily life.

The aim is to make essential items more affordable, support industries, and simplify the overall tax system.

Some products like cigarettes, bidis, and chewing tobacco will continue with their old rates until a later date, but almost everything else will see new rules.

Implementation and Transition

The new GST rates will be effective from 22nd September 2025. Businesses will continue with the same registration thresholds as before, so there is no change in compliance for small traders.

If goods or services are supplied before this date but the invoice or payment happens later, the time of supply rules under GST will decide which rate applies.

Input Tax Credit (ITC) already claimed will remain valid and can be used for future tax liabilities.

However, if a product becomes exempt under the new schedule, businesses will need to reverse ITC for those supplies.

For goods in transit, there is no need to cancel or reissue e-way bills; the existing ones remain valid.

Daily Essentials and Food

A number of household food products have become cheaper under the new GST rates.

UHT milk, which earlier attracted tax, is now exempt, just like regular milk. Plant-based milk and soya milk drinks have also been reduced to 5% GST, making them more affordable.

All Indian breads, whether roti, paratha, porotta or pizza base, are now fully exempt.

On the other hand, non-alcoholic beverages and carbonated fruit-based drinks will attract a higher rate of 40%. This is because the earlier system of GST plus compensation cess has been merged into a single rate.

Paneer in unpackaged form continues to be tax-free, while packaged paneer has been adjusted separately to promote small producers. Natural honey enjoys lower tax compared to artificial honey in order to support Indian farmers and beekeepers.

Health and Insurance

Healthcare has received a strong push through lower tax rates. All medicines will now attract a concessional 5% GST, with some essential drugs remaining at nil rate.

Medical devices, instruments, and apparatus used in medical, surgical, or veterinary practice are now taxed at 5% instead of the earlier 12% or 18%. This will reduce treatment costs for patients.

In addition, the GST Council has exempted life and health insurance policies from GST.

All individual life insurance products, such as term plans, ULIPs, and endowment plans, are exempt, as are family floater and senior citizen health insurance policies. This move will directly reduce the financial burden on households.

Agriculture and Rural Economy

The farming community will benefit from reduced rates on agricultural machinery and equipment. Sprinklers, threshers, drip irrigation systems, and other cultivation machines have all been brought down from 12% to 5%.

However, the Council has not made these items fully exempt, because doing so would have broken the input tax credit chain and hurt manufacturers. Small tractors also continue to attract tax for the same reason.

Bicycles and their parts, important for rural mobility, have been reduced to 5% from 12%. Raw cotton remains taxed under the reverse charge mechanism to ensure smooth credit flow to the textile industry.

Automobiles and Transport

The automobile sector has seen one of the biggest restructurings. Small cars with petrol, CNG, or LPG engines up to 1200 cc and diesel engines up to 1500 cc will now attract 18% GST instead of 28%.

Larger cars, SUVs, and utility vehicles will carry a single 40% GST without compensation cess.

Two-wheelers have also been rationalised. Motorcycles up to 350 cc are taxed at 18%, while those above 350 cc are taxed at 40%.

Three-wheelers, buses, ambulances, and trucks all now attract 18%, down from 28%. Tractors are taxed at 5% or 18% depending on engine capacity. Bicycles, as noted earlier, are down to 5%.

This merging of GST and cess into simpler slabs makes the system more transparent for both consumers and manufacturers.

Household and Personal Care

Everyday products used in households have become cheaper. Toilet soap bars are now taxed at only 5%. Items like face powder, shampoos, and shaving cream also fall under the 5% rate.

Dental care products such as toothpaste, toothbrushes, and dental floss are reduced to 5% as well. Mouthwash, however, remains taxed at a higher rate because it is not considered a basic necessity.

Also Read: Why Is Cheese More Expensive Than Paneer Despite 0% GST On Dairy?

Energy and Environment

Coal, which earlier had both GST and compensation cess, now comes under a single GST rate, meaning no additional burden for power generation. Tendu leaves, a forest product used for rolling bidis, have been reduced to 5% in line with tobacco leaves.

Renewable energy equipment and devices, such as solar panels and wind power machinery, now attract just 5% GST, down from 12%.

This change will encourage wider adoption of clean energy. Marble, travertine, and granite blocks have also been reduced from 12% to 5% as they are considered intermediate goods.

Electronics and Appliances

Consumer electronics and home appliances have also seen reductions. Air conditioners and dishwashers have come down from 28% to 18%.

Televisions and monitors, regardless of size, are now uniformly taxed at 18%, ending the earlier split between small and large screens.

All batteries, including lithium-ion, will be taxed at 18%. Spectacles and goggles for vision correction now attract only 5%, while fashion goggles remain at 18%.

Services Sector

Passenger transport services continue at a merit rate of 5% without ITC, but operators can opt for 18% if they want to claim input credits. Air travel in economy class stays at 5%, while higher classes are taxed at 18%.

Goods transport services by GTA or Container Train Operators can choose between 5% without ITC or 18% with ITC. Multimodal transport will attract 5% unless it involves air, in which case the rate is 18%.

Job work services in pharmaceuticals, hides, and leather have been reduced to 5% with ITC, while residuary job work has gone up to 18%.

Beauty and wellness services such as salons, gyms, and yoga centres will now attract only 5% without ITC instead of 18%.

High-Rate and Luxury Categories

Some items remain in the highest tax category of 40%. These include casinos, betting, gambling, lotteries, online gaming, and admission to premium sporting events such as IPL.

Regular recognised sports remain exempt up to a ticket price of Rs 500, and above that, they are taxed at 18%. Carbonated fruit beverages are also placed under the 40% slab.

This category mostly covers sin and luxury goods and replaces the earlier cess system.

Oil, Gas, and Hotels

Works contracts relating to offshore oil and gas exploration are fixed at 18%. Hotel rooms priced up to Rs 7,500 per night remain at 5% without ITC, keeping middle-class travel affordable.