GST Overhaul: Essential Goods to Get Cheaper as New Two-Slab System Kicks In from September 22
New Delhi, 21st September 2025: Starting tomorrow, September 22, essential goods and services in India will be taxed under only two Goods and Services Tax (GST) slabs—5% and 18%—as the government implements a major overhaul of the indirect tax structure.
The decision was taken at the 56th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman, who announced the reform on September 3. The move aims to simplify the tax system and provide relief to consumers.
Key changes in GST structure
The existing four-tier GST system of 5%, 12%, 18%, and 28% has been reduced to two slabs—5% and 18%. In addition, a special cess of 40% will apply on tobacco, pan masala, carbonated drinks, and luxury items such as large cars, yachts, and aircraft for personal use.
Several daily-use goods and services are set to get cheaper:
- Soap, shampoo, and food items will now attract only 5% tax.
- Cement, earlier taxed at 28%, will now fall under the 18% slab.
- TVs, ACs, small cars, and motorcycles up to 350cc will also move from 28% to 18%.
- Auto parts and three-wheelers will see their tax rate reduced from 28% to 18%.
- No GST will be levied on 33 essential medicines, particularly those for cancer and other critical illnesses.
- Life and health insurance premiums, previously taxed at 18%, are now fully exempt.
Common food staples such as chenna, paneer, roti, chapati, and paratha will also be exempt from GST.
Impact on prices
To illustrate the benefit, a bottle of hair oil priced at ₹100 earlier attracted 18% GST, raising its final cost to ₹118. Under the new system, it will be taxed at just 5%, bringing the final price down to ₹105—a saving of ₹13 for consumers.
What happens to old stock with higher MRPs?
The government has clarified that even goods with higher MRPs will be sold at reduced prices after the GST change. For medicines, the National Pharmaceutical Pricing Authority (NPPA) has directed manufacturers to update MRPs of all drugs, formulations, and medical devices. The revised price list must be shared with dealers, retailers, and state authorities for customer transparency.
Consumer safeguards
If retailers fail to pass on the benefits of lower GST to consumers, strict action can be taken. Complaints can be registered through:
- National Consumer Helpline: 1800-11-4000
- CBIC GST Helpline: 1800-1200-232
- National Anti-Profiteering Authority website
Defaulters may face penalties, including fines or imprisonment.
With the new tax slabs, the government expects lower prices across a wide range of goods and services, potentially boosting consumption and easing household budgets.
