The Goods and Services Tax (GST) Council on Wednesday approved the biggest reshaping of India’s indirect tax system since it was first rolled out in 2017. The changes slash duties on a wide range of daily-use items, from toothpaste and cooking oil to medicines and tractors, while raising taxes on luxury goods, soft drinks, and tobacco.

The council has now simplified the GST structure by reducing the existing four slabs (5%, 12%, 18%, and 28%) to just two main slabs: 5% and 18%. A special 40% slab will apply only to high-end goods such as luxury cars, cigarettes, tobacco, and aerated drinks.

The new rates will come into effect on September 22, except for tobacco and related products, which will move to the 40% slab once existing state compensation loans are repaid.

What gets cheaper?

Food and beverages

  • No GST on chapatis, paranthas, paneer, pizza bread, khakra, and ultra-high temperature (UHT) milk.

  • Common food items like butter, ghee, dry nuts, sausages, jam, biscuits, pastries, cereals, fruit juices, confectionery, and ice cream will now attract 5% GST instead of 18%.

  • Plant-based milk drinks and soya milk drinks will be taxed at 5% (down from 18% and 12% respectively).

  • Cheese and other fats will now fall under the 5% bracket instead of 12%.

Household items

  • Toothpaste, shampoo, talcum powder, soap, hair oil, and toothbrushes will move to 5% GST from 18%.

  • Tooth powder, feeding bottles, kitchenware, umbrellas, bicycles, combs, and bamboo furniture will also be taxed at 5% instead of 12%.

Appliances and electronics

  • Air-conditioners, dishwashers, and TVs will now attract 18% GST, down from 28%.

Stationery

  • Pencils, notebooks, charts, maps, crayons, pastels, and globes will be tax-free (nil rate) instead of 12%.

  • Erasers will also become tax-free (from 5%).

Footwear and textiles

  • GST on mass-market footwear and textiles has been reduced to 5% from 12%.

Healthcare

  • Life-saving drugs and medical products will be taxed at 5% or nil, instead of 12–18%.

  • Thermometers, oxygen cylinders, diagnostic kits, glucometers, test strips, and corrective spectacles will now fall under the 5% slab.

  • Individual life and health insurance policies will be tax-free.

Travel and hospitality

  • Hotel rooms priced up to ₹7,500 will be taxed at 5% without ITC (down from 12%).

  • Economy class flight tickets will attract 5% GST.

  • Third-party goods carriage insurance will be 5% with ITC (down from 12%).

Vehicles and auto parts

  • Motorcycles up to 350cc and small hybrid cars will now be taxed at 18% instead of 28%.

  • Auto components have also been cut to 18% from 28%.

  • Electric vehicles remain at 5% GST.

Construction and agriculture

  • Cement will become cheaper with rates down to 18% from 28%.

  • Agricultural machinery, pumps, sprinklers, tractors, and their parts will move to 5% from 12–18%.

  • Fertiliser inputs like sulphuric acid, nitric acid, and ammonia will also fall under 5% GST.

  • Biopesticides and micronutrients have been reduced to 5%.

Fitness and beauty services

  • Salons, gyms, spas, yoga centres, and health clubs will attract just 5% GST without ITC, down from 18%.

What gets costlier?

Aerated and caffeinated beverages

  • Soft drinks like Coca-Cola and Pepsi, energy drinks, and all sugar-sweetened beverages will now attract 40% GST (up from 18–28%).

Vehicles

  • Cars above 1,200cc (petrol) or 1,500cc (diesel), SUVs, motorcycles above 350cc, yachts, private aircraft, and racing cars will be taxed at 40%.

Tobacco products

  • Tobacco and related products will continue at 28% plus compensation cess for now, but will eventually shift to the 40% GST slab.

Leisure and gambling

  • Casinos, gambling, horse racing, online money gaming, and IPL tickets will now attract 40% GST.

  • Race clubs and rental services linked to leisure activities will also fall into the 40% category.

The government hopes the simplified slab structure will make compliance easier for businesses, encourage spending, and soften the impact of US tariffs on Indian exports. The GST overhaul touches nearly every sector, from food and travel to healthcare and construction, directly affecting consumers across the country.