GST New Tax Slabs: What Gets Cheaper, What Gets Costlier From September 22

India's GST reform lowers taxes on essential goods and raises them on luxury items. Food staples like milk, paneer, and biscuits, along with personal care products and educational supplies, now have a 5% GST or are tax-free.

From the kitchen to the classroom, and from hospitals to showrooms, India's latest GST revamp is set to touch almost every household. On Wednesday, Finance Minister Nirmala Sitharaman announced sweeping reforms to the Goods and Services Tax (GST), calling it a "pro-people, pro-growth" step. The new rates will take effect from September 22, 2025, coinciding with the start of Navratri.

For families and the middle class, the changes mean lower prices on everyday essentials, while luxury and sin goods will now attract steeper taxes.

What Gets Cheaper: Relief for Households

For homemakers and shoppers, the biggest relief comes in the form of daily food and personal care items.

• Chapatis, parathas, paneer, milk, and khakra will now attract 0% GST, making the Indian thali lighter on the wallet.
• Everyday staples like butter, ghee, biscuits, jam, juices, namkeen, ice cream, and cornflakes have moved to a 5% slab from 18%, a big win for households.
• Even shampoo, toothpaste, soaps, talcum powder, and hair oil—often called unavoidable monthly spends—are down to 5% GST, from the earlier 18%.

Parents too will find relief: pencils, notebooks, crayons, and globes are now tax-free, making back-to-school shopping easier.

Healthcare has also been made more affordable. Life-saving drugs, diagnostic kits, thermometers, and spectacles now carry minimal or no tax. Importantly, individual life and health insurance policies are tax-free, a move expected to encourage more families to invest in financial protection.

Gains for Builders, Farmers and Buyers

The reforms also target sectors that affect a large portion of the population.

• Cement will now attract 18% tax instead of 28%, giving a boost to home construction.
• Small cars, bikes and scooters—particularly petrol cars under 1200cc and diesel under 1500cc—shift to the 18% slab. Electric vehicles stay at a concessional 5% rate, continuing the green push.
• Motorcycles up to 350cc, TVs, ACs, and dishwashers will now attract 18% GST instead of 28%.
• Farmers will benefit from cheaper tractors, irrigation equipment, and fertiliser inputs, all moved to 5% GST.

What Gets Costlier: Luxury Lifestyle Under Spotlight

On the flip side, the reforms make it clear that luxury comes at a price.

• Aerated drinks, caffeinated beverages, and sugary sodas like cola will now carry a steep 40% GST, up from 28%.
• Luxury SUVs, large cars, personal yachts, private jets, and high-end motorcycles also move into the 40% slab.
• Casinos, horse racing, online gaming, and race clubs will see the same elevated tax.
• Tobacco and gutkha products remain at 28% plus cess until pandemic-era compensation loans are cleared, after which they too will face 40% GST.

A Balancing Act

The government has pitched this as a carefully balanced reform. On one hand, food, healthcare, construction, and small vehicles are set to become more affordable, providing relief to families and farmers. On the other, luxury consumption, sin goods, and indulgence services will bear higher levies, ensuring revenue is not compromised.

For the middle class, these reforms could mean real savings in the monthly budget, while industries like real estate, auto, and agriculture could see a demand boost.

As Sitharaman said, the GST revamp is designed to “ease the burden on the common man while ensuring that those who can afford luxury contribute more.”