The Goods and Services Tax Council approved sweeping reforms during its 56th meeting held in Delhi on Wednesday. The council, led by Finance Minister Nirmala Sitharaman, announced changes that will directly benefit households across India. Essential goods like bread, chapati, paratha, paneer, hair oil, ice cream and even consumer electronics like televisions will now become cheaper. The new GST rates will come into effect from September 22, marking one of the most significant tax reforms since the implementation of GST in India.
Key Decisions of the GST Council
Finance Minister Nirmala Sitharaman explained that the council decided to simplify the tax structure by reducing the number of slabs. Now there will be only two main slabs of 5 percent and 18 percent. The earlier slabs of 12 percent and 28 percent have been eliminated. For luxury and harmful goods, a separate 40 percent slab has been created. This rationalization aims to make GST easier to understand and fairer to consumers.
The decision came after weeks of consultations and was backed by finance ministers of all states. Sitharaman acknowledged the role of Prime Minister Narendra Modi in guiding these reforms and thanked state governments for their cooperation.
What Becomes Cheaper with New GST Rates
The reduction in GST slabs has made daily use products more affordable. Essential foods like chapati, roti, bread, paneer and cheese will now be taxed at zero percent. This means that basic Indian breads, whether roti or paratha, will be completely tax-free.
Personal care items including hair oil, soap, shampoo, toothpaste and toothbrush will now fall under the 5 percent slab. This brings relief for families who spend regularly on hygiene products. Dairy items like butter, ghee and cheese spreads are also included in the reduced category.
Household goods such as kitchenware, tableware and sewing machines are also covered under the lower rate. For parents, baby products like bottles, napkins and clinical diapers will now cost less. Medical devices including thermometers, oxygen, diagnostic kits, glucose meters and spectacles are also placed in the 5 percent slab.
Consumer electronics have seen a significant reduction. Air conditioners, televisions larger than 32 inches, washing machines and motorcycles up to 350cc capacity now attract 18 percent instead of 28 percent. Monitors, projectors and tractors with engines above 1800cc are also placed in this revised category.
Life-saving drugs, including 33 medicines used for cancer and rare diseases, will now attract zero GST instead of 12 percent. Health insurance and life insurance premiums are also exempted, offering major relief for the middle class.
Items Under 40 Percent Slab
Luxury and harmful goods have been kept in the highest slab of 40 percent. This includes cigarettes, gutkha, pan masala, bidis, tobacco products, carbonated drinks with added sugar, caffeinated beverages and non-alcoholic sweetened drinks. High-end motorcycles above 350cc, private aircrafts, yachts, revolvers, pistols, betting, casinos, gambling, lotteries and online money gaming also fall under this category.
Cars above 1200cc petrol and 1500cc diesel with longer dimensions, along with private racing vehicles, are also taxed at 40 percent. This is intended to ensure that luxury consumption does not undermine the tax relief provided to essential items.
Impact on Festivals and Common Life
The timing of this announcement is significant. With Durga Puja, Diwali and Chhath approaching, the reduction in GST is expected to ease household expenses. Families preparing for festivals will find groceries, sweets, personal care products and electronics more affordable. Retailers are optimistic that the reduced tax burden will increase sales during the festive season.
Transporters also welcomed the move since motor vehicles for goods movement now attract a lower tax rate. Farmers will benefit as irrigation equipment, sprinklers, drip irrigation systems and agricultural machinery fall under the reduced 5 percent slab.
Medical relief is another major highlight. With diagnostic kits, oxygen and life-saving medicines placed in zero or five percent slabs, healthcare costs will reduce. This change directly supports patients suffering from critical illnesses and families spending heavily on medical treatments.
Statements from the Finance Minister
Addressing a press conference after the GST Council meeting, Finance Minister Nirmala Sitharaman said the changes were designed with the common citizen in mind. She explained that every daily use item was reviewed carefully to ensure that unnecessary tax burdens were removed.
Sitharaman stated that labor-intensive industries would benefit as raw materials and essential inputs are now cheaper. This would help small businesses, farmers and the healthcare sector. She emphasized that these reforms are not just tax reductions but steps to strengthen the economy by supporting demand and consumer confidence.
She also confirmed that electric vehicles will continue to enjoy a 5 percent GST rate, maintaining government focus on sustainable mobility.
How the New Slabs Simplify GST
Earlier, India’s GST structure was criticized for being complex with multiple slabs. Consumers often found it difficult to understand why similar goods were taxed differently. For instance, different types of breads or rotis attracted separate rates. The new structure resolves these confusions by placing all Indian breads in the zero percent category.
By reducing the slabs to two main categories, the government aims to simplify compliance for businesses. This will also make it easier for consumers to anticipate costs. Experts believe that this reform could reduce litigation and disputes between businesses and tax authorities.
Economic and Political Significance
The GST reforms come at a politically crucial time, just before major festivals and ahead of elections. By reducing tax on essential goods, the government hopes to ease inflationary pressure on households. The move also signals responsiveness to public concerns about high prices.
Economists suggest that lower taxes on consumer goods may boost demand, which can support manufacturing and retail sectors. The decision to impose high taxes on luxury items while cutting rates on daily essentials reflects an attempt to balance social equity with revenue needs.
The new GST slabs approved by the council mark a turning point in India’s indirect tax system. By reducing the number of slabs, exempting essential items and focusing on affordability, the government has aimed directly at the concerns of the common man. With items like roti, paratha, paneer, hair oil, shampoo, televisions and medical essentials becoming cheaper, households across India will feel the difference.
The changes also send a message that GST is evolving to meet the needs of people and the economy. While luxury consumption remains heavily taxed, the relief for everyday goods is expected to energize markets and bring cheer during the festive season. As the reforms take effect from September 22, all eyes will be on how these adjustments impact consumer spending and business confidence across the country.
