The Indian government has announced a big change in the GST (Goods and Services Tax) system. These changes are being called GST 2.0 and will apply from 22nd September 2025. The main goal is to make GST simple, reduce taxes on daily-use items, and put higher taxes on luxury or harmful products.
What Has Changed?
Earlier, GST had four main slabs – 5%, 12%, 18% and 28%.
Now, the government has simplified it into four categories:
- 0% (Nil rate) – for essential goods and education items.
- 5% – for most daily-use items and services.
- 18% – for common goods like appliances, small cars, and many services.
- 40% – for luxury and sin goods like tobacco, high-end cars, cigars etc.
This means the 12% and 28% slabs are removed for most products.
Category-Wise GST Rates
Here’s a simple breakdown of what got cheaper and what got costlier:
- Essentials (food, milk, notebooks, bread, paneer, erasers, pencils) → Now either 0% or 5% GST.
- Daily-use items (soap, shampoo, toothpaste, butter, ghee, cheese, snacks) → Down to 5%.
- Electronics & small vehicles → Moved to 18% (earlier many were at 28%). Example: small cars, bikes up to 350cc, fridges, ACs etc.
- Hotels, salons, gyms, yoga services → 5% GST.
- Health insurance, life insurance, school items → Mostly exempt or 0%.
- Luxury & harmful goods (gutkha, cigarettes, luxury cars, cigars) → Now taxed at a very high 40%.
Old vs New Rates (Few Examples)
ItemEarlier GSTNew GSTWhat it meansButter, Ghee, Cheese12–18%5%CheaperShampoo, Soap, Toothpaste18%5%CheaperSmall Cars (under 4m, petrol ≤1200cc / diesel ≤1500cc)28%18%CheaperMotorbikes up to 350cc28%18%CheaperNotebooks, Erasers, Pencils12%0%Free from GSTCigarettes, Gutkha, Luxury Cars28% (plus cess)40%Costlier
Things to Keep in Mind
- Luxury and sin products will be costlier.
- Some items may still see confusion during the transition, especially on old stock.
- Businesses have time till 31st December 2025 to update MRPs on products.
- In some cases, zero GST may create issues for manufacturers because they cannot claim input tax credit.
Conclusion
The new GST system starting from 22nd September 2025 is one of the biggest changes since GST was first introduced. It is designed to reduce the burden on middle-class families, encourage consumption, and make taxation simpler.
For most people, daily essentials, small cars, bikes, and personal care products will get cheaper. On the other hand, luxury cars, tobacco, and harmful items will get costlier.
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