GST Overhaul: India Slashes Tax Rates on Essentials, Insurance, and More

New Delhi, Sept 4, 2025 — In a landmark move aimed at simplifying India’s indirect tax regime and boosting consumer sentiment, the GST Council has approved sweeping changes to Goods and Services Tax (GST) rates. The revised structure, effective from September 22, introduces a streamlined two-slab system of 5% and 18%, replacing the earlier four-tier model of 5%, 12%, 18%, and 28%.

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🔑 Key Highlights of the New GST Framework

• Zero GST on Life & Health Insurance
  Individual life and health insurance premiums are now fully exempt from GST, offering relief to millions of policyholders.
• Daily Essentials Get Cheaper
  Items like toothpaste, shampoo, hair oil, soap, bicycles, and kitchenware will now attract just 5% GST, down from 18%.
• Food Products in Focus
  Ultra-high temperature (UHT) milk, paneer, roti, paratha, and pizza bread will now be taxed at 0%, making everyday meals more affordable.
• Consumer Goods Reclassified
  TVs, dishwashers, and small cars will move from the 28% slab to 18%, while luxury items like high-end motorcycles, yachts, and tobacco products will face a 40% GST under the new “sin goods” category.
• Footwear & Apparel Relief
  Footwear and garments priced up to ₹2,500 will now fall under the 5% slab, compared to the previous 12% rate.

🧮 Economic Impact

The rate rationalisation is expected to result in a revenue loss of approximately ₹47,700 crore. However, officials argue that the move will stimulate domestic demand, ease compliance for small businesses, and align with Prime Minister Narendra Modi’s vision of “ease of living” and “ease of doing business”.

🗣️ What Leaders Are Saying

Finance Minister Nirmala Sitharaman called the reform “structural, not just rate rationalisation,” emphasizing its role in correcting inverted duty structures and simplifying compliance. PM Modi hailed the decision as a “GST bonanza for the common man,” reinforcing his Independence Day promise of tax relief.

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