New GST Rates As of September 22: What is Cheaper and What is More Expensive

India has made a major change to its Goods and Services Tax (GST) regime as of September 22, 2025, otherwise known as GST 2.0. The former four-grade system of 5, 12, 18 and 28 percent has been eliminated with a single rate system of two which consists of 5 and 18 percent. There will also be a 40 percent rate on a restricted set of luxury and sin products.

The reform is meant to ease the burden of the consumers by lowering prices of daily necessities, medication, school supplies and other services and impose a high tax on luxurious commodities. The following is the summary of changes:

What Gets Cheaper

• Daily Essentials

Between 18 and 5: Hair oil, shampoo, toothpaste, dental floss, toothpaste, toilet soap, shaving cream, shaving lotion, face powder and talcum powder.

Between 12 and 5 percent: Condensed milk, butter, ghee, cheese, nuts, dried fruits and snacks like namkeen, bhujia and mixtures.

The utensils, feeding bottles, and sewing machines will be reduced too.

• Healthcare

Between 18 percent and zero: personal health and life insurance payments.

Between 12 -18 percent to 5 percent: The majority of medicines, diagnostic kits, glucometers and medical-grade oxygen.

• Education

Between 12% and Nil: Maps, charts, globes, pencils, sharpeners, crayons, pastels and notebook.

From 5% to Nil: Erasers.

• Carmobiles and electronics.

Between 28 percent and 18 percent: Small cars, bicycles, auto parts, and EV components. This covers petrol, diesel and hybrid vehicles with a limited engine and length capacity, 3-wheelers and motorcycles to 350cc.

Between 28 percent and 18 percent: Air conditioners, over-32 inch television, monitors, projectors and dishwashers.

Other Goods and Services

Between 12 and 18 percent to 5 percent: Tractors, tractor parts, bio- pesticides, drip irrigation systems, construction materials including granite blocks and marble and hotel accommodation of up to 7,500/day.

5 to 18%: Fitness Center, salons, hairdressers, and yoga studios services.

What Gets Costlier

• Luxury and Sin Goods

28 per cent. to 40 per cent.: Carbonated soft drinks containing sugar.

Between 28 and 40 percent: Motorcycles that have an engine capacity of over 350cc.

From 12% to 18%: Clothes priced above ₹2,500.

Constant High Tax: Pan masala, gutkha, cigarettes and other tobacco products will still fall under a 28 percent plus tax bracket.

• Other Items

From 5% to 18%: Coal.

What It Means for Consumers

As a result of the implementation of GST 2.0, the majority of households will enjoy reduced prices of daily essentials, education supplies, medicines, insurance, and services that they frequent. On the other hand, the government is retaining increased tax on luxury consumption and certain commodities to balance the income and deter their usage. The streamlined form is likely to simplify the business compliance and lessen consumer confusion that would most likely increase the demand in the annual festive season.