INDIA GST reform Highlights 2025

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The GST Council, led by Finance Minister Nirmala Sitharaman, announced a major revamp of the GST structure, collapsing the four existing tax slabs into just two primary rates—5% and 18%, with a special 40% rate retained for select “sin” and luxury goods.
The existing four-tier GST regime (5%, 12%, 18%, 28%) has been streamlined into two core slabs: 5% and 18%, plus a special 40% “sin and luxury” slab
The 40% rate targets tobacco products, carbonated beverages, pan masala, high-end luxury goods, and similar items.

These changes will take effect from 22 September 2025, aligning with the start of Navratri—an important festival period in India.

A wide range of essential and consumer items will benefit from lower rates:
Zero GST on staples like UHT milk, paneer, roti, paratha, chapati, and several life-saving cancer drugs.
Clean food and personal items (e.g., chocolates, noodles, butter, ghee, sauces, coffee, namkeen) are shifted to 5%.

Life-saving medicines and a broad range of drugs now fall under nil or 5% GST.
Life and health insurance premiums are fully exempt from GST

Goods like air conditioners, TVs, dishwashers move from 28% down to 18%
Cement, small cars, bikes below 350 cc, 3‑wheelers, ambulances, and trucks now attract 18% instead of 28%.
Electric vehicles remain at 5% GST, offering continued support for sustainable mobility.
- Everyday goods: packaged food, toothpaste, milk products, medicines — GST dropped to 5%.
- Insurance products: now tax-exempt.
- Electronics & appliances: TVs and air conditioners reduced from 28% to 18%.
- Vehicles: most small cars now at 18% tax, while electric vehicles remain at 5%.

Bicycles, soaps, hair oil, shampoos, utensils, tableware, toothbrushes, toothpaste, and similar household items now at 5% (down from 12–18%).
Stationery (notebooks, maps, globes, pencils, erasers) now mostly nil or 5%.
Agricultural machinery, fertiliser inputs, bio‑pesticides, and related equipment are now taxed at 5%.

Hotel rooms up to ₹7,500/day, and economy class flight tickets now taxed at 5%, down from 12%.

The reform is expected to reduce inflation by up to 1.1 percentage points, while triggering a possible revenue dip of ₹48,000 crore (roughly $5–6 billion).
Industry response has been largely positive, citing improvements in compliance, affordability, and business sentiment.

The reform isn’t just about tax slabs—it’s a broader shift to streamline GST systems:
- Faster registration for small businesses (e.g. in 3 working days).
- Automation: AI-powered invoice matching, e-way bill tracking, even blockchain for tamper-proof records.
- Improved taxpayer experience with reduced compliance costs and digital enforcement.

January 16, 2025:
- GST on Fortified Rice Kernel (FRK) cut to 5%; Gene Therapy fully exempt; Used vehicles taxed at 18% based on margin.

April 1, 2025:

Mandatory MFA (Multi-Factor Authentication) for GST portal access.
e‑Way bills restricted to invoices from the past 180 days; extensions capped at 360 days.
GSTR‑7 and GSTR‑8 forms enhanced; new invoice series required each fiscal year.
Mandatory e-invoicing for credit notes and separate series per invoice type.

July 1, 2025:

INDIA GST reforms Highlights 2025