Beginning today (September 22, 2025), India has rolled out GST 2.0, a major change in the tax system that affects almost everything we buy.The government has simplified the old system of four tax rates (5%, 12%, 18%, 28%) into two main slabs, 5% and 18%, with an extra 40% tax for luxury and harmful products.

Prime Minister Narendra Modi has called this reform the beginning of a “Bachat Utsav” (festival of savings), saying that households will see lower prices on daily essentials. The goal of GST 2.0 is to reduce confusion, make compliance easier, cut down disputes, and give people more savings.

What gets cheaper?

Under GST 2.0, many essentials and daily-use items have become cheaper. Food and dairy products like UHT milk, chapati, paratha and parotta are now tax-free, while butter, ghee, paneer, cheese, biscuits, chocolates, pasta, cornflakes, namkeens and bhujia will attract only 5% tax. 

Dry fruits and sweets such as almonds, cashews, pistachios, dates, refined sugar and confectionery have also been moved to the 5% slab. In healthcare and education, life-saving drugs, medical devices and books are either tax-free or taxed at 5%. 

Everyday consumer productslike hair oil, shampoos, toothpaste and dental floss are down to 5%, while larger appliances, including washing machines, dishwashers, and televisions, now fall under 18% instead of 28%. The automobile sector also benefits, with small cars and bikes (up to 350cc) taxed at 18% and health and life insurance made tax-free. 

Similarly, housing and farming inputs such as fertilisers, seeds, crop inputs and certain construction materials are cheaper at 5%. Even the services sector sees relief, with hotel tariffs below ₹7,500 and economy air tickets now taxed at just 5%.

What gets costlier?

While essentials have become cheaper under GST 2.0, certain categories will now attract higher taxes. Luxury and sin goods such as cigarettes, gutkha, zarda, pan masala and aerated drinks will be taxed at 40%. Similarly, big vehicles like bikes above 350cc and luxury cars also fall under the steep 40% slab. The cost of coal is set to rise as its tax rate has increased from 5% to 18%, impacting coal-based industries. In the leisure and gaming sector, casinos, horse racing, lotteries and even IPL tickets will now carry a heavy 40% tax, making indulgence in these activities costlier.

Will you really save?

Big companies like Toyota, Mahindra, Tata, HUL, Amul, and Mother Dairy have already announced price cuts. But past surveys show that only 2 in 10 people felt the benefits from earlier GST cuts, as many manufacturers and retailers did not reduce prices. Experts say strong monitoring is needed so that the savings actually reach customers.

GST 2.0 promises lower taxes on daily items and essential services, but whether you feel the benefit depends on how honestly companies pass on the savings.