The Goods and Services Tax (GST) Council has rolled out a sweeping set of reforms that many experts are calling GST 2.0. Effective from September 22, 2025, these reforms simplify India’s indirect tax system and impact a wide range of sectors including food, travel, automobiles, electronics, jewellery, real estate, healthcare, education, hospitality, and luxury goods.
Finance Minister Nirmala Sitharaman highlighted that the new structure is aimed at “reducing the burden on common households, boosting economic activity, and aligning India’s taxation system with global standards.”
Key Highlights of GST 2.0
- Simplified Structure: Two main slabs — 5% and 18% — plus a 40% luxury/sin slab. Tobacco continues under 28% + cess.
- Relief on Essentials: UHT milk, paneer, chapatis, and life/health insurance are now GST-free.
- Middle-Class Push: Electronics, small cars, two-wheelers, and personal services now fall under 18%.
- Luxury Goods: High-end cars, yachts, aerated drinks, and premium hotel stays fall under 40%.
- Gold & Jewellery: Remains unchanged at 3% (including making charges).
- Healthcare & Education: Exemptions and reliefs on essential services and supplies continue.
GST Rate Snapshot
- 0%: UHT milk, paneer, chapatis, erasers, maps, life & health insurance.
- 5%: Packaged food, edible oil, toothpaste, soaps, essential medicines, EVs, fertilizers, economy tickets.
- 18%: Electronics, small cars, two-wheelers, IT services, cement, packaged water, business-class tickets.
- 40%: Luxury cars, SUVs, yachts, aerated drinks, helicopters, premium hotels, imported liquor.
- 28% + cess: Tobacco, cigarettes, gutkha, pan masala (transitional).
- Gold & Silver Jewellery: 3% (unchanged).
View Full Item-Wise GST Rate Table (2025)
| Sector / Item | GST Rate | Remarks |
|---|---|---|
| Staple foods (atta, rice, pulses, sugar, bread, edible oil basic) | 5% | Merit rate for essentials |
| UHT milk, paneer, chapatis/rotis, life & health insurance | 0% | Essential household & insurance relief |
| Packaged water, soaps, toothpaste | 5–18% | Basic 5%, premium variants at 18% |
| Electric vehicles | 5% | Encouraging clean mobility |
| Essential medicines, diagnostic kits, medical devices | 5% or Nil | Health sector relief |
| Life & health insurance (individual) | Exempt | GST-free insurance |
| Pre-school to higher-education (recognised institutions) | 0% | Education service exemption |
| School stationery (maps, erasers, pencils, notebooks) | 0% | Exempted educational supplies |
| Tutors, coaching, test-prep, ed-tech (non-recognised) | 18% | Standard rate for private education services |
| School uniforms & basic footwear (≤ ₹1,000) | 5% | Merit rate |
| Uniforms/footwear > ₹1,000 | 18% | Standard slab |
| Books and textbooks | 0% | Exempted educational materials |
| Small cars (≤ 1200cc petrol / ≤ 1500cc diesel) | 18% | Rate cut for affordable cars |
| SUVs, luxury cars (> 350cc) | 40% | Luxury vehicle slab |
| Motorcycles ≤350cc | 18% | Growth segment |
| Auto parts & tyres (general) | 18% | Standard rate |
| Electronics (TVs, ACs, fridges, laptops, mobiles) | 18% | Consumer electronics |
| Cement, steel, paints, tiles | 18% | Construction inputs |
| Affordable housing (special scheme) | As notified | Scheme-based treatment |
| Real estate (ready-to-move property) | Out of GST | Stamp duty applies |
| Fertilizers, basic pesticides, tractors | 5% | Support agriculture |
| Seeds, irrigation equipment | 0–5% | As per notifications |
| Apparel ≤ ₹2,500 | 5% | Merit slab |
| Apparel > ₹2,500 | 18% | Standard slab |
| Footwear ≤ ₹1,000 | 5% | Merit category |
| Footwear > ₹1,000 | 18% | Standard category |
| Textiles, fabrics (non-luxury) | 5–18% | Depends on HSN specifics |
| Cinema tickets (standard) | 18% | Uniform rate |
| Online gaming, betting | 28% + cess | Sin/gaming tax |
| Sports & event tickets | 18% | Standard rate |
| IT & professional services (consulting, software, CA, legal, cloud) | 18% | Service sector standard |
| Financial services (bank charges) | 18% | Excluding exempt financial products |
| OTT, app stores (digital services) | 18% | Digital services taxation |
| LPG households | 5% | Household energy |
| Petrol, diesel, ATF, natural gas | Outside GST | Taxed under central/state levies |
| Hospitality: budget hotels ≤ ₹7,500 | 5% | Merit for travel |
| Mid-range hotels ₹7,500–₹15,000 | 18% | Standard slab |
| Luxury hotels > ₹15,000 | 40% | Luxury segment |
| Restaurants – non-AC/small eateries | 5% | Lower dining category |
| Restaurants – AC/fine dine & catering | 18% | Higher-end dining |
| Aerated/soft drinks, sugary beverages | 40% | Sin goods |
| Imported liquor | 40% | Luxury alcohol |
| Tobacco, cigarettes, gutkha, pan masala | 28% + cess | Ongoing cess transition |
| Gold & silver jewellery | 3% | Unchanged from previous structure |
Pros and Cons of GST 2.0
Pros
- Simplified structure eases compliance.
- Relief on essentials and medicines helps households.
- Encourages middle-class consumption.
- Boost to tourism due to cheaper travel & hotels.
Cons
- Revenue loss of approx ₹48,000 crore to government.
- Luxury sector faces heavy taxation.
- Jewellery sector still compliance-heavy.
- Businesses must quickly adapt to new rates.
FAQs on New GST Rates 2025
1. When will the new GST rates come into effect?
From 22 September 2025. Tobacco products transition separately.
2. What are the GST slabs?
Two main slabs — 5% & 18%, plus a 40% luxury slab. Tobacco remains at 28% + cess.
3. Has GST on gold changed?
No, gold and silver jewellery continue at 3%.
4. What is tax-free now?
Milk, paneer, chapatis, life & health insurance, maps, and erasers.
5. How will GST affect medicines?
Essential medicines and devices at 5% make healthcare more affordable.
6. Impact on cars?
Small cars and 2-wheelers 18%. Luxury vehicles 40%.
7. Electronics under GST?
Most consumer electronics like TVs, mobiles, ACs are at 18%.
8. GST on insurance?
Life and health insurance premiums are now exempt.
9. Effect on education?
Books exempt. Core educational services remain GST-free.
10. Inflation impact?
Expected to reduce inflation by around 1%.
Conclusion
The GST 2.0 reforms of 2025 simplify India’s tax structure, ease pressure on essentials, and encourage consumption. Luxury goods face higher rates, but overall, GST 2.0 is expected to improve compliance and stimulate economic growth.
Report by Toofan Express