Ajit Kumar
Key Highlights of the Reform
- Simplified Tax Structure
India is moving from a complex four-tier GST system to a two-slab model: 5% and 18%, with an additional 40% slab for luxury and sin goods like high-end cars, tobacco, and certain beverages.
Reuters+1TehelkaThe Hans India - Effective Date:
The reform becomes operative on September 22, 2025, aligning with the start of Navratri.
ReutersTehelkaThe Hans India - Tax Reductions on Essentials:
- Items vital for daily life—like food staples, medicines, toiletries, dairy products—will now attract 5% GST, down from 12% or 18%.
ReutersThe Times of IndiaNewsnation EnglishThe Hans India - Life and health insurance policies are now fully exempt (0% GST)—a notable relief for consumers.
The Times of India+1The Hans India - Salon, gym, and beauty services are also now taxed at 5%.
The Hans India
- Items vital for daily life—like food staples, medicines, toiletries, dairy products—will now attract 5% GST, down from 12% or 18%.
- Support for Farmers:
Agricultural equipment including tractors, tyres, parts, and fertilizers will now attract 5% GST.
ReutersThe Times of IndiaNewsnation English - Electronics & Automobiles:
- Items like air conditioners, TVs, and kitchen appliances will move to 18% GST.
The Hans IndiaNewsnation English - Small cars, motorcycles up to 350 cc, and goods vehicles shift to 18%, improving affordability.
The Hans IndiaNewsnation English
- Items like air conditioners, TVs, and kitchen appliances will move to 18% GST.
- Luxury & Sin Goods – Higher Tax:
Higher-tier items such as mid-size and large cars, SUVs, high-capacity bikes, private aircraft, and sin goods will continue to be taxed at 40%.
TehelkaThe Hans IndiaReuters+1
Implementation Exception
- The rollout of the 40% slab on tobacco and pan masala has been deferred. These products will transition at a later unspecified date.
The Economic Times
Economic Impact & Industry Reactions
- Revenue Impact:
The change could result in a revenue loss estimated at ₹48,000 crore—significant but lower than earlier projections. It may also help reduce inflation by up to 1.1 percentage points.
Reuters+1 - Reform Reception:
The overhaul has been widely welcomed across sectors:- Mahindra Group called it a “transformative” step.
- HDFC ERGO lauded the GST exemption for insurance.
- Kotak Mahindra AMC sees it fostering economic growth and ease of doing business.
Reuters
- Centre-State Balance:
The government affirmed that both the Centre and the states are equal stakeholders in the reform process, aiming to preserve fiscal balance.
The Times of India
At a Glance
| Reform Aspect | Key Detail |
|---|---|
| Rates Introduced | 5%, 18%, and 40% slabs |
| Effective From | September 22, 2025 (Navratri) |
| 0% GST | Life & health insurance |
| Major Reductions | Daily essentials, farmer inputs, electronics, vehicles (small bracket) |
| State Revenue | Some losses expected, but managed with structured rollout |
| Exception Noted | Tobacco & pan masala deferred for now |
Tweeted by Nirmala Sitharaman @nsitharamanoffc
Hon’ble Prime Minister Shri@narendramodi announced the Next-Generation GST Reforms in his Independence Day address from the ramparts of Red Fort. Working on the same principle, the GST Council has approved significant reforms today. These reforms have a multi-sectoral and multi-thematic focus, aimed at ensuring ease of living for all citizens and ease of doing business for all. #NextGenGST
