Mega GST reforms announced! Slabs cut to two at 5% and 18%; sin goods to attract 40% tax

Following up on Prime Minister Narendra Modi’s Independence Day promise of mega GST reforms by Diwali this year, the Goods and Services Tax (GST) Council Wednesday approved a major rate overhaul. Addressing a press briefing late in the evening, Finance Minister Nirmala Sitharaman said the GST slabs are being reduced to just two – 5 per cent and 18 per cent.

The new slabs come into force on September 22, on the first day of Navratri.

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Speaking after chairing the 56th GST Council meeting in New Delhi today, Sitharaman said that these reforms have been carried out with a focus on the common man.

“Every tax on the common man’s daily use items has gone through a rigorous review, and in most cases, the rates have come down drastically. Labour-intensive industries have been given good support. Farmers and the agriculture sector, as well as the health sector, will benefit. Key drivers of the economy will be given prominence,” she said.

She stated that in items used by the common man and the middle class, there is a complete reduction in tax rates. The FM said that hair oil, shampoo, toothpaste, toilet soap, toothbrushes, and shaving cream will now attract only 5 per cent GST instead of 18 per cent.

GST on butter, ghee, cheese, dairy spreads, pre-packaged namkeens, bhujia, mixtures, utensils, feeding bottles, and napkins for babies, clinical diapers, and sewing machines and its parts have been reduced from 12 per cent to 5 per cent.

She further stated that all the Indian breads will see a nil rate. “So, roti or paratha or whatever it is, they all come to nil,” the FM apprised.

Delhi: Arvind Shrivastava, Secretary, Department of Revenue, Ministry of Finance, says, “…As far as footwear is concerned, there were two rates earlier: 12% on footwear below ₹1,000 and 18% on footwear above ₹1,000. As you know, the 12% rate no longer exists. Now the two… pic.x.com/df69RAPMn1

— IANS (@ians_india) September 3, 2025

Reduction from 28 per cent to 18 per cent 

Air conditioning machines, TVs (LEDs and LCDs), which are over 32 inches, dishwashing machines, small cars, motorcycles equal to or less than 350 cc will now be taxed at 18 per cent.

Goods under 40 per cent slab

The 40 per cent GST slab will be applied to “sin” and luxury goods. It will be applied to products that are either harmful to health or considered high-end. The products include:

• Tobacco including bidi and gutkha
• Pan masala
• Sugar-based and aerated drinks
• Other luxury goods (e.g. luxury cars, premium apparel, business-class air travel)

Farmers and agriculture

Farmers have benefitted from the reduced GST tax slabs as the prices of equipment and chemicals have been reduced.

• Tractor Tyres & Parts: 18 per cent to 5 per cent
• Tractors: 12 per cent to 5 per cent
• Bio-Pesticides, Micro-Nutrients: 12 per cent to 5 per cent
• Drip Irrigation Systems & Sprinklers: 12 per cent to 5 per cent
• Soil Preparation, Cultivation, Harvesting & Threshing Machines: 12 per cent to 5 per cent

Automobiles

Small petrol, diesel and hybrid cars are also set to get cheaper. Petrol and petrol hybrid cars (not exceeding 1200 cc & 4000 mm) will now fall under the 18 per cent, a 10 per cent GST rate cut from earlier 28 per cent. Diesel and diesel hybrid cars (not exceeding 1500 cc & 4000 mm) too will move down to 18 per cent from 28 per cent tax slab.

Three-wheelers have also been shifted to 18 per cent slab, so as motorcycles up to 350 cc. GST on motor vehicles for transport goods will also come down from 28 per cent to 18 per cent.