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Two-Slab GST Taxation
September 8 , 2025
16 hrs 0 min
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- Goods and Services Tax (GST) Council, in its 56th meeting, approved a two-slab structure retaining 5% and 18% rates, effective from September 22, 2025.
- A 40% “special rate” was introduced for sin and luxury goods, including tobacco, pan masala, aerated drinks, yachts, helicopters, and large cars.
- Household products like soap, shampoo, toothbrush, toothpaste, bicycles, and tableware are now taxed at 5%, down from 12% or 18%.
- Food items like pasta, instant noodles, sauces, chocolates, coffee, and packaged namkeens moved to 5% from higher slabs.
- Indian breads, including rotis, chapatis, parathas, along with ultra-high temperature (UHT) milk and paneer, moved to 0% GST from 5%.
- Two-wheelers with engine capacity up to 350cc, small cars, air-conditioners (ACs), televisions (TVs), and dishwashers are now taxed at 18%, reduced from 28%.
- Cement moved from 28% to 18%, supporting housing and infrastructure sectors.
- Buses, trucks, ambulances, and all auto parts are now uniformly taxed at 18%.
- 33 lifesaving medicines and diagnostic kits moved to 0% GST from 12%; spectacles reduced from 28% to 5%.
- Bio-pesticides, bio-menthol, handicrafts, marble, and granite blocks are now taxed at 5%, down from 12%.
- Inverted duty structure corrected in the textile sector by reducing GST on manmade fibre from 18% to 5% and manmade yarn from 12% to 5%.
- Fertilizer inputs like sulphuric acid, nitric acid, and ammonia are now taxed at 5% instead of 18%, reducing farming costs.
- Individual life and health insurance policies moved from 18% to 0% GST, expanding financial protection.
- GST on tobacco, pan masala, gutka, cigarettes, zarda, and bidi remains at 28% plus compensation cess until the Centre repays cess-related loans.
- These tobacco-related products will shift to the 40% slab once loan and interest liabilities on compensation cess are cleared, expected by the end of 2025.
- Estimated ₹48,000 crore revenue impact due to rate cuts based on 2023–24 consumption, with expected improvement in compliance and tax buoyancy.
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