GST slabs reduced from five to three: 0%, 5% and 18%, with a special 40% sin tax for luxury and harmful products.
Everyday essentials, many appliances, small cars and insurance premiums will now cost less.
Luxury vehicles, tobacco, alcohol and online gaming remain expensive under the highest tax category.
22 September 2025: Goods and Service Tax (GST) reforms come into effect from today. This marks a historical step in the country’s indirect tax system. First introduced in 2016, GST had 5 slab structures i.e. 0%, 5%, 12%, 18% and 28%.
In early September GST Council cut down slabs to 3 which are 0%, 5% and 18%, and luxury and sin goods like Casino, Race Club and tobacco etc. put under the 'Sin Tax' (40%).
0% GST: Processed milk, paneer, pizza bread, ready-to-eat chapatis, as well as pencils, notebooks, and 33 life-saving medicines will now be tax-free. Health and life insurance also comes under this Slab now.
5% GST: Items like vegetable oil, ghee, sugar, biscuits, chocolates, pasta, juices, shampoo, soap, toothpaste, household utensils, and sewing machines have become cheaper. Tractors, agricultural equipment, thermometers, and medical glucometers are also included in this category.
18% GST: Air conditioners, washing machines, TVs, monitors, projectors, small cars, three-wheelers, two-wheelers with engines below 350 cc, and ambulances will now cost less due to reduced tax rates.
Everyday Essentials (12% → 5%): Toothpaste, soaps, shampoos, biscuits, snacks, juices, ghee, condensed milk, bicycles, stationery, low-priced apparel & footwear.
Appliances & Electronics (28% → 18%): ACs, refrigerators, dishwashers, large TVs, cement.
Automobiles: Small cars (28% → 18%), two-wheelers lower slab; luxury cars/SUVs unchanged.
Insurance/Financial Services: Premiums may move to a lower slab or be exempt.
High Tax (40% “sin tax”): Tobacco, alcohol, pan masala, online betting/gaming.
Vehicles: Two-wheelers with engine capacity above 350cc, large SUVs, and luxury cars have now become more expensive.
Others: Fuel (outside GST), Alcohol (outside GST), diamonds, precious stones.