New Delhi: In a landmark move, the GST Council– chaired by Finance Minister Nirmala Sitharaman, has approved sweeping tax reforms that will simplify India’s Goods and Services Tax regime into a two-slab structure: 5% and 18%, effective September 22, 2025. A new 40% levy has been introduced for sin and luxury goods, including tobacco products, aerated drinks with added sugar, and high-end vehicles.

Further reading on GST reforms

What’s Changing?

• Essentials and Household Items:
  • Everyday products like hair oil, soaps, pasta, noodles, coffee, ghee, and namkeen now attract a 5% GST.
  • UHT milk, paneer, Indian breads (roti, paratha, chapati), and select medicines are now exempt from GST. 
• Home Appliances and Vehicular Goods:
  • GST on air conditioners, TVs, dishwashers, cement, small cars, motorcycles under 350cc, buses, trucks, and auto parts has been cut to 18%. 
• Insurance & Healthcare:
  • All individual life and health insurance policies, including senior citizen and floater plans, are now GST-free.
  • 33 critical life-saving drugs have also been exempted from GST.
• Agriculture & Sustainability:
  • Equipment like soil harvesters and composting tools are now taxed at 5% (down from 12%).

Spotlight on Sin & Luxury Goods

A new 40% rate will apply to products like pan masala, gutka, cigarettes, aerated sodas with added sugar, and luxury items such as yachts, personal aircraft, and motorcycles above 350cc. This aims both to deter consumption and generate revenue to offset other rate cuts.

What Drove the Changes?

Prime Minister Narendra Modi called these “next-generation reforms,” aiming to streamline the GST through “ease of living” and better compliance. The bipartisan decision was reached unanimously-though states voiced concerns over potential revenue losses. West Bengal estimated losses at ₹47,700 crore, while independent assessments estimate ₹93,000 crore in foregone revenues, with sin-good levies expected to recover ₹45,000 crore. 

Reactions & Ramifications

• Market Response: The reforms were generally welcomed-the stock markets reacted positively, and sectors like automotive, FMCG, insurance, and electronics expect renewed momentum.
• Public Sentiment: Across social media, netizens applauded the relief on essentials-seeing the reforms as a timely pre-festive-season gift.

Final Thoughts

The “GST 2.0” reform is a strategic attempt to simplify India’s complex tax regime, bolster consumption, and strike a balance between affordability and fiscal prudence. As it rolls out in sync with Navratri, its success will hinge on effective implementation and clarity for both taxpayers and states.