GST New Rules and Regulations September 2025: GST Tax Rate Changes on a Major Scale
Goods and Services Tax (GST) launched in 2017 was India's largest indirect tax overhaul. Now in September 2025, the government has unveiled GST 2.0, which fully streamlines the system. Its primary aim is to make essentials more affordable, give a boost to MSMEs and establish a transparent, consumer-friendly tax system.
eFiling Company makes it easy for you to understand these new GST changes and comply.
GST Reform 2025: A Step Towards Progress
1. GST 2.0: What changed?
- The previous 4-tier GST slabs have now been replaced by 2 slabs + a luxury slab:
- 5% (Essential Rate): Day-to-day goods and priority services.
- 18% (Standard Rate): High-end goods and services.
- 40% (Luxury & Sin Rate): Luxury items and noxious products.
This new framework is effective from 22 September 2025, during Navratri, so that families can receive festive relief.
2. Major Highlights of GST 2.0
- 12% and 28% slabs have been eliminated.
- Luxury/Sin slab has been increased to 40%.
- GST will no longer be levied on Health & Life Insurance.
- Filing and refund have become much quicker and easier.
3. GST Rate Changes: Previously vs. Today
- Life-saving medicines: 12% → NIL
- Ayurvedic medicines: 12% → 5%
- Soaps, toothpaste, stationery: 12–18% → 5%
- Paneer, breads, UHT milk: 5–12% → NIL
- Packaged snacks, pasta, sauces: 12–18% → 5%
- Cement: 28% → 18%
- Marble, granite, bricks: 12% → 5%
- Small vehicles, motorcycles ≤350cc: 28% → 18%
- Tractors, harvesters: 12% → 5%
- Hotel accommodation (≤ 7,500): 12% → 5%
- Gyms, salons, yoga centers: 18% → 5%
- Exercise books, pencils: 12% → NIL
- Aerated beverages, tobacco: 28% + cess → 40%
- Luxury vehicles, yachts, aircraft: 28% + cess → 40%
4. Sector-Wise Impact
- Healthcare & Medicines
- Life-saving medicines are tax-free now.
- Ayurvedic and general medicines are now just 5%.
- Medical equipment such as spectacles, thermometers are also now affordable.
Household & Food
- Soaps, toothpaste, hair oil are now 5%.
- Paneer, breads and UHT milk are now completely tax-free.
- Processed foods such as pasta, sauces and chocolates are now just 5%.
Construction & Real Estate
- Cement has now dropped from 28% to 18%.
- Marble, granite and bricks are now 5%.
Automobiles
- Small cars and two-wheelers of up to 350cc are now just 18%.
- Tractors, harvesters and irrigation equipment are now just 5%.
Services & Hospitality
- Hotel stays of up to 7,500 are now 5%.
- Gyms, salons and yoga services have now come down from 18% to 5%.
Education
- Exercise books, pencils, erasers are now GST free.
- Geometry boxes and school cartons are now 5%.
Luxury & Sin Goods
- Tobacco, pan masala and aerated drinks are now 40% GST.
- Luxury cars, yachts and private jets are also in the 40% slab.
5. Government's Rationale
The principal reason for the government is:
- To make the system simpler with less slabs.
- To assist MSMEs by lowering input prices.
- To increase exports by eliminating duty distortions.
- To boost consumption by lowering essentials.
- To enhance financial safety with GST-free insurance.
In the short run, the government can face a revenue loss of 48,000 crore, but in the long run, both compliance and demand will increase.
6. Easy Compliance
GST 2.0 is not merely a rate reduction, compliance has also been made easy now:
- New GST portal – quick and error-free filing.
- Faster refunds for MSMEs/exporters.
- Transparent classification of products – fewer disputes.
- Easy return formats – less paperwork.
7. Market & Industry Reactions
- Auto, FMCG and construction sector shares rejoice.
- Experts termed it as business-friendly and consumer-friendly move.
- States also welcomed it as part of Vikasit Bharat 2047 vision.
This far-reaching overhaul—GST 2.0, which becomes operational from September 22, 2025—is a major move towards a simplification, equity-based, and growth-promoting tax regime. Consumers are relieved on household items and insurance, companies are advantaged with rate certainty and accelerated refunds, and policymakers are able to maximize revenue through increased duties on high-value items.
These revisions should increase consumption, sustain the festival economy, and dampen inflationary pressures, all while upholding fiscal balance.
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