New GST Rates: In the year 2025, the Goods and Services Tax, also referred to as GST has underwent a major change. The GST Council has revised the tax rates to simplify the process and also make it more transparent.

These changes will come into effect from September 22, 2025, and aim to balance revenue collection while ensuring that essential items remain affordable for consumers. Here we provide a comprehensive overview of the new GST rates, slabs, exemptions, and their impact on consumers and businesses.

Also Read: Goods And Services Tax (GST) Council

New GST Slabs Overview

The New GST Slabs 2025 have now simplified the existing multi-tier system. Earlier, there were four main slabs: 5%, 12%, 18%, and 28%. With the new reforms, the structure has been streamlined into the following slabs:

• 5% GST: Applied to essential goods and basic services.
• 18% GST: Applied to standard goods and services that are neither essential nor luxury.
• 40% GST: Introduced for luxury goods and sin products, including high-end automobiles, tobacco, and aerated drinks.

The new GST rules make taxes simpler for everyone. Everyday items remain affordable for families, while luxury goods and harmful products are taxed more heavily. This helps people buy wisely and reduces confusion for both shoppers and businesses.

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Key Changes in the New GST Structure

Provided here are the details on the key changes that have been made in the new GST structure. Check the information below to get key insights into the same: 

1. Simplification of Tax Rates

In the New GST Rates slab, the reduction from the four main GST slabs to two standard GST slabs is the major change. Earlier, the 12% and 28% slabs were applied to many consumers and industries. This often led to huge confusion in the GST slab. So, now the new GST Rates simplify the tax computation, lower the risk of errors, and speed up the process. 

This approach ensures a clear distinction between essential items and luxury or harmful products, which helps in proper fiscal management.

2. Introduction of the 40% GST Rate

A special 40% GST rate has been introduced to target luxury and sin items. This category includes:

• High-end vehicles from luxury brands
• Tobacco products like cigarettes
• Aerated and carbonated drinks

This measure aims to reduce the consumption of non-essential items. Thereby increasing government revenue from high-value products. It also encourages consumers to prioritize essential and standard goods.

3. Exemptions for Essential Goods

The new GST structure continues to exempt essential goods and services from tax, ensuring affordability for all sections of society. Key exempted items include:

These exemptions are designed to keep daily necessities accessible to everyone, particularly low- and middle-income households.

Detailed GST Rates by Category

To help consumers and businesses understand the tax impact, the new GST rates are divided into categories. These categories show which goods and services fall under each slab.

1. 0% GST Items List in India

Certain essential products remain completely tax-free under the 0% GST category. This includes unprocessed food items, basic agricultural products, and healthcare services. The aim is to protect the affordability of basic necessities.

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2. 5% GST Items List

The 5% slab applies to essential goods and commonly used household products. Examples include:

This low slab reduces the financial burden on households while encouraging consumption of necessary goods.

3. 12% and 18% GST Items

The 12% slab has been merged with 18% in the new reforms. The 18% GST applies to standard goods and services, including:

The 18% rate balances revenue collection with consumer affordability.

4. 28% and 40% GST Items

Luxury and sin products, which previously attracted 28% GST, now fall under the 40% slab. These include:

By taxing these items heavily, the government discourages overconsumption and generates higher revenue from non-essential goods.

Impact of New GST Rates on Consumers

The new GST rates affect consumer prices. Some everyday items will become cheaper, while luxury and sin goods may cost more. These changes aim to balance affordability and government revenue.

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Items That Will Become Cheaper

Consumers can expect a reduction in the cost of several goods and services due to the simplified slab structure. Some of the notable changes include:

• Personal Care Products: Soap, toothpaste, and shampoo prices are expected to decrease.
• Household Appliances: Refrigerators, washing machines, and air conditioners will be more affordable.
• Small Automobiles: Compact cars and electric vehicles will become cheaper.
• Healthcare Products: Medicines and medical equipment prices will be reduced.

Items That Will Become Costlier

Luxury and sin goods are likely to see a price increase due to the new 40% GST slab. These include:

• High-end cars from premium brands
• Cigarettes and tobacco products
• Aerated drinks and carbonated beverages

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