Published on 03 September 2025 by CareerDec
In a landmark decision, the GST Council meeting today approved a major overhaul of the indirect tax system, introducing a simplified two-tier structure under what is being termed Next Gen GST Reforms. The new framework, often referred to as GST 2.0, will take effect from September 22, the official new GST implementation date.
Union Finance Minister Nirmala Sitharaman announced the decision after the 56th GST Council meeting, calling it a unanimous move with no objections from states.
“We’ve reduced the GST slabs to just two-5% and 18% - while also addressing compensation cess. These GST changes are focused on the common man, ensuring most daily-use items now fall under lower GST rates,” she said in a statement, according to PIB.
GST New Slabs: From four slabs (5%, 12%, 18%, 28%) to just two-5% and 18%
40% GST Slab: A new top tier for luxury and sin goods including cigarettes, pan masala, and high-end cars
GST Rate Cuts: Items like toothpaste, shampoo, and soaps drop from 18% to 5%
GST on Insurance: All life and health insurance GST charges exempted
GST on Cars: Small cars, air conditioners, and TVs shifted from 28% to 18%
GST on Gold and cement GST rate remain unchanged for now, though officials hinted at future reviews
Life-saving drugs, cancer medicines, treatment for rare diseases
Health insurance GST: Exemption on all life and insurance GST policies
Educational items: maps, charts, notebooks, pencils, erasers
Essential food items: paneer, UHT milk, chapati, roti, pizza bread
Personal care: shampoo, hair oil, toothpaste, soaps, shaving cream
Dairy and food: butter, ghee, cheese spreads, namkeens, utensils
Baby products: feeding bottles, diapers, napkins
Medical: thermometers, oxygen, diagnostic kits, glucometers, corrective spectacles
Agriculture: tractor parts, drip irrigation, bio-pesticides, soil preparation machines
New GST rates for cars: small petrol, diesel, hybrid cars (within set engine size limits)
Motorcycles up to 350cc, three-wheelers, and goods transport vehicles
Consumer durables: ACs, dishwashers, TVs above 32 inches, projectors, monitors
Road tractors with engines above 1800cc
GST on cigarettes, gutka, pan masala, chewing tobacco, bidis
Sugary and caffeinated aerated beverages
Luxury goods: motorcycles above 350cc, yachts, private aircraft, revolvers, pistols
The new GST reform is aimed at boosting domestic demand, simplifying compliance, and reducing consumer prices amid global economic challenges. With the revised GST rates, essentials like toothpaste and shampoo drop to 5%, while new GST on cars shifts small cars to 18%, down from 28%.
High-end goods, however, move into the 40% GST slab-part of the government’s push to tax luxury consumption while easing the burden on households.
Prime Minister Narendra Modi had hinted at the GST reduction during his Independence Day speech. Following the GST Council meeting update, he reiterated that the new GST rates list would “improve lives, empower small traders, and strengthen ease of doing business.”
The new GST rate list will officially take effect on September 22, coinciding with the start of Navratri-a festive period known for higher consumer spending.
For businesses and traders, this marks the beginning of Next Gen GST reforms 2025, widely being reported as GST 2.0 in the Economic Times and other outlets covering the GST latest news.
With this new GST update, India hopes to simplify its tax system, boost transparency, and stimulate economic activity in the face of global uncertainties.
