GST Shake-Up: What Gets Cheaper, What Gets Dearer? Check Full List of Items Under 0%, 5%, 18% & 40% Slabs

From September 22, GST will have just two slabs—5% and 18%—with a special 40% rate for sin and luxury goods. Everyday items, medicines, and small cars get cheaper, while cigarettes, luxury cars, and aerated drinks remain costly.

In one of the biggest tax reforms since its launch in 2017, the Goods and Services Tax (GST) Council has approved a rationalised tax structure that cuts down the number of slabs. From September 22, most goods and services will fall under just two rates – 5% and 18%. A new special slab of 40% has been created exclusively for sin and luxury goods, such as cigarettes, pan masala, aerated beverages with added sugar, and high-end cars.

Union Finance Minister Nirmala Sitharaman, announcing the changes after the 56th GST Council meeting, said:

“We’ve reduced the slabs. There shall be only two slabs, and we are also addressing the issues of compensation cess. In common man and middle-class items, there is a complete reduction.”

What Becomes Cheaper from Sept 22

The GST rationalisation directly impacts household budgets, food items, medicines, and even automobiles. Here’s what you can expect to cost less:

• Daily essentials (5%) – Hair oil, toilet soap, soap bars, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, tableware, and other household articles.
• From 5% to nil – Ultra-high temperature (UHT) milk, chena, paneer, and all Indian breads, including roti and paratha.
• From 12% or 18% to 5% – Food items like namkeen, bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, and ghee.
• From 28% to 18% – Air conditioning machines, dishwashing machines, televisions above 32 inches (all TVs now at 18%), motorcycles below 350cc, and small cars.
• Life-saving medicines (nil) – GST scrapped on 33 life-saving drugs and medicines, including those for cancer, rare diseases, and chronic conditions.
• Agriculture & labour-intensive goods (5%) – Tractors, harvesting machines, bio-pesticides, natural menthol, handicrafts, marble, granite blocks, intermediate leather goods.
• Infrastructure & energy (5%/18%) – Cement down from 28% to 18%. Renewable energy devices (solar cookers, panels, windmills, biogas plants, waste-to-energy systems) now at 5%.
• Auto sector (18%) – Uniform rate of 18% on auto parts, buses, trucks, ambulances, and three-wheelers.

What Stays Costly: The 40% Club

While consumers will enjoy relief on everyday goods, a new 40% slab has been created for luxury and sin products.

“There is one special rate which is only for sin and super luxury goods. That special rate of 40% has also been proposed, and it's been cleared and will apply only to paan masala, cigarettes, gutka, and other tobacco products,” Sitharaman said.

Items in the 40% category include:

• Pan masala, gutkha, zarda, and all tobacco products.
• Aerated beverages, carbonated drinks with added sugar or caffeine, and fruit-based carbonated beverages.
• Mid-size and large cars, SUVs, motorcycles above 350cc.
• Yachts, helicopters, private jets, and vessels for personal use.

Relief on Insurance and Healthcare

To widen social protection, insurance premiums will now become more affordable. Sitharaman confirmed:

“Exemption of GST on all individual life insurance policies, whether term life, ULIP, or endowment policies, and reinsurance thereof… Exemption of GST on all individual health insurance policies, including family floater policies and policies for senior citizens.”

Footwear Gets Rationalised

Footwear will now be taxed in two clear brackets. According to Revenue Secretary Arvind Shrivastava:

“Footwear costing less than Rs 2,500 will be charged at 5% and those costing more than Rs 2,500 at 18%.”

EVs Stay at 5%

Electric vehicles (EVs) retain their current 5% GST rate, ensuring no disruption to India’s green mobility push.

When Will It Apply?

The new rates will take effect from September 22, 2025, the first day of Navratri. However, sin goods such as tobacco products will continue under the 28% slab plus cess until the Centre clears outstanding compensation cess loans. After that, they will migrate to the 40% slab.

What It Means for You

For households, this means cheaper groceries, toiletries, medicines, and even small vehicles. For businesses, simplified compliance under just two slabs promises reduced paperwork and fewer disputes. But for luxury buyers and smokers, the message is clear — be ready to pay more.

India’s GST overhaul is being pitched as a “Diwali gift” by the government, but its real test will lie in whether states can manage the projected revenue loss of nearly ₹47,700 crore without cutting back on welfare spending.