The Goods and Services Tax (GST) Council, in its 56th meeting in New Delhi, has announced a wide range of changes to tax rates on goods and services.

These decisions are aimed at simplifying the system, reducing disputes, and keeping the balance between consumers and producers. Most of the new rates will come into effect from September 22, 2025, while items such as cigarettes, chewing tobacco and beedis will see revised rates later, once existing cess-linked liabilities are cleared.

WHEN DO THE NEW RATES START?

The revised GST rates will apply to goods and services from September 22, 2025. For tobacco-related products, the current rates will continue for now, and new rates will be announced later.

EVERYDAY ESSENTIALS

The Council has offered relief on several daily-use items. Toilet soap bars, shampoos and face powders will now attract a tax of 5%. Indian breads such as roti, paratha and porotta have been fully exempted. Food preparations not falling under any other category will also be taxed at 5%.

DRINKS AND BEVERAGES

Carbonated fruit drinks and beverages with fruit juice will see higher GST. This is because these products earlier attracted both GST and compensation cess. With cess now gone, the tax rate has been adjusted to maintain the overall collection.

RELIEF FOR FARMERS

Agricultural machinery including sprinklers, drip systems, threshers, and even beekeeping equipment will now face only 5% GST instead of 12%. The government chose not to make them completely tax-free, as that would increase costs for manufacturers and eventually push up prices for farmers.

MEDICINES AND HEALTH COVER

All medicines and drugs will attract 5% GST unless they are specifically listed as nil-rated. Medical devices will also be taxed at 5%. Importantly, life insurance and health insurance policies, including term plans, ULIPs, family floaters and senior citizen policies, have been fully exempted from GST.

VEHICLES ON NEW SLABS

Small cars with petrol, LPG or CNG engines up to 1200 cc, or diesel engines up to 1500 cc, and under four metres in length, will now attract 18% GST instead of 28%. Larger cars, SUVs, and utility vehicles with higher engine capacity and length will face a steep 40% GST.

Motorcycles up to 350cc, including exactly 350cc, will attract 18% GST, while those above 350cc will be taxed at 40%. Three-wheelers and buses meant to carry ten or more passengers will also see rates cut to 18%. Bicycles and their parts will now attract 5%, down from 12%.

HOME AND HOUSEHOLD APPLIANCES

Air conditioners and dishwashers, which earlier faced 28% GST, will now be taxed at 18%. All TVs and monitors, regardless of size, will also attract a uniform 18% rate.

SERVICES UNDER NEW SLABS

Passenger transport services will continue at 5% GST without input credit, though operators can choose the 18% rate if they wish to claim credit. Beauty and wellness services such as salons, gyms and yoga centres will now attract 5% without credit, a sharp fall from the earlier 18%.

ENTERTAINMENT AND GAMING

A high 40% GST has been fixed on lottery, casinos, betting, horse racing and online money gaming. Admission to events like the IPL will also carry 40% GST, but recognised sporting events continue under the old structure. Tickets priced at 500 or less remain exempt, while those above 500 will be taxed at 18%.

HOW WILL OLD SUPPLIES AND INVOICES BE TREATED?

If goods or services were supplied before the rate change, but the invoice is issued afterwards, the rate will depend on when payment was received. Payments made before the change will attract old rates, while those received later will follow the new ones.

WHAT ABOUT STOCK AND INPUT CREDIT?

If you already hold stock purchased at old rates, there is no need to worry. Tax credit can still be claimed as per the law, provided the tax was correctly charged at the time of purchase. Once the new rates are in place, any goods sold or supplied will be taxed at the revised rate.

The bigger picture

The idea behind the changes is to make GST simpler and fairer. By cutting rates on essentials such as soaps, medicines and farm machinery, the Council hopes to ease the burden on households and farmers. At the same time, luxury and sin goods will continue to carry higher taxes, helping the government maintain revenues.

– Ends

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