As announced by Prime Minister Narendra Modi on Independence Day, a significant overhaul of the GST (Goods and Services Tax) slabs has been introduced after eight years, offering a special tax reduction gift to the public for Diwali. The previous GST slabs of 12%, 18%, and 28% have been simplified to just two main slabs: 5% and 18%. This reform is expected to reduce the prices of approximately 90-99% of items previously taxed under the 12% and 28% slabs, directly impacting daily essentials, medicines, automobiles, and other goods.

Which Items Will See a Price Reduction?

With the implementation of the new GST rules, the prices of the following goods and services will see a significant reduction, benefiting farmers, the middle class, and the general public. Below are the key categories and examples:

1. Healthcare and Medicines

• Previous GST Rate: 12% or 18%

• New GST Rate: 5% or 0% (tax-exempt)

• Items Affected:

  • Medicines for diabetes, blood pressure, cancer, heart conditions, cholesterol, arthritis, kidney diseases, and tuberculosis (TB).

  • Insulin.

  • Personal health and life insurance – no GST applicable.

• Impact: Reduced medicine costs will provide relief to patients, especially those with chronic illnesses.

Aahwan Women's Fit And Flare Midi Dress

2. Daily Essentials

• Previous GST Rate: 12%

• New GST Rate: 5%

• Items Affected:

  • Paneer, pizza bread, papad, fruit juices, tender coconut, butter, cheese, pasta, ice cream.

  • Rubber and rubber products – no GST applicable.

• Impact: Lower prices for daily-use items will ease household expenses for common families.

3. Automobiles and Vehicles

• Previous GST Rate: 28%

• New GST Rate: 18%

• Items Affected:

  • Small cars (up to 1200 cc), bikes (up to 350 cc), and vehicle spare parts.

  • (Luxury cars may continue to attract a 40% tax rate.)

• Impact: Affordable vehicles and spare parts will benefit the middle class and small vehicle owners.

GST Council Announces Major Tax Reforms: 5% and 18% Slabs to Remain, Effective September 22

4. Textiles and Clothing

• Previous GST Rate: 12%

• New GST Rate: 5%

• Items Affected:

• Synthetic yarn, hand-spun fiber yarn, carpets, and handicraft items.

• Impact: Reduced costs for textiles and handicrafts will support artisans and consumers.

5. Tobacco and Luxury Goods

• Previous GST Rate: 28%

• New GST Rate: Up to 40% for certain “sin goods” (e.g., cigarettes, luxury items).

• Details:

  • Tobacco, tobacco products, and select luxury items will continue to attract a higher tax rate, termed as the “profit and sin tax,” to balance state revenues.

  • General price reductions of 5-10% may apply, depending on the product.

• Impact: Limited relief for these categories, with higher taxes retained to regulate consumption.

Implementation Timeline

• The new GST rules will come into effect from September 22, 2025, coinciding with the festive season of Dussehra or Diwali.

• A final agreement is expected during the 56th GST Council Meeting on September 3-4, 2025.

• Union Finance Minister Nirmala Sitharaman provided details about these changes in a press conference in New Delhi.

Broader Impact

This announcement brings significant relief to the middle class, patients (through reduced medical expenses), and ordinary families (through lower daily expenses). The simplified GST structure is a landmark reform aimed at making essential goods and services more affordable.