New Delhi: In a historic move, the GST Council has approved sweeping reforms to simplify the indirect tax regime and deliver relief across sectors that touch the daily lives of citizens. The 56th meeting of the Council has approved a two-tier rate structure—a standard 18% and a merit rate of 5%—along with a special de-merit rate of 40% for a select few goods.
This marks the most significant rationalization of GST since its launch in 2017.
These new GST rates will be implemented from 22 September 2025.
A host of everyday essentials—hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, and other household items—will now attract only 5% GST instead of the earlier higher slabs.
Food products too have been brought under sharp cuts, with packaged namkeens, noodles, chocolates, coffee, and sauces down to 5%, while Ultra-High Temperature (UHT) milk, paneer, and all Indian breads such as roti, paratha will now be tax-free.
Healthcare has seen a transformative shift. The Council scrapped GST entirely on all individual life and health insurance policies, including reinsurance, making coverage more affordable.
In addition, 33 life-saving medicines have been brought to zero tax, three critical drugs for cancer and rare diseases are also exempt, and all other medicines will now attract only 5% GST.
Medical equipment such as surgical devices, diagnostic kits, bandages, and glucometers too have been rationalized down to 5%. Farmers and rural industries have received a direct push.
Tractors, harvesting machines, soil preparation equipment, and composting machines now fall in the 5% slab.
Labor-intensive sectors like handicrafts, marble, granite, and leather goods will also benefit from reduced rates, a move aimed at job creation and protecting small enterprises.
The automobile and infrastructure sectors witnessed notable corrections. GST on cement has been cut from 28% to 18%, while small cars, two-wheelers up to 350 cc, buses, trucks, and ambulances will all attract 18%.
To end long-standing anomalies, all auto parts will now carry a uniform 18% rate.
The textile sector’s inverted duty structure has been fixed, with manmade fiber and yarn reduced to 5%, while fertilizers such as sulfuric acid, nitric acid, and ammonia have also been rationalized to 5%. Sustainability and services also found a place in the reforms. Renewable energy devices, budget hotel rooms below Rs 7,500, and services at gyms, salons, barbers, and yoga centers will now all come under the 5% bracket, making them more accessible to the masses.
Described as a “citizen-centric evolution” of GST, these reforms reflect the government’s effort to align taxation with affordability, ease of doing business, and long-term growth priorities.
