In a major decision aimed at providing relief to households and boosting economic activity, the GST Council on Wednesday announced sweeping changes to the tax structure with new slabs of 0%, 5%, 18% and 40%, effective from September 22, the first day of Navratri.

Union Finance Minister Nirmala Sitharaman said the restructuring focused on easing the burden on essential items while keeping luxury and sin goods under higher taxation.

What Becomes Cheaper Under New GST Slabs

Tax-Free (Nil GST)

• All varieties of chapati and paratha (down from 5%)

• Individual life and health insurance policies

• Life-saving cancer drugs

5% GST Slab (Earlier 12–18%)

• Household items: tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture, combs

• Personal care: shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap, hair oil

• Food items: namkeen, sauces, pasta, chocolates, butter, ghee

18% GST Slab (Earlier 28%)

• Cement (down from 28%)

• All auto parts and 3-wheelers

• Consumer durables: air-conditioners, dishwashers, TVs, motorcycles up to 350 cc

• Smaller vehicles: petrol, LPG and CNG cars up to 1,200 cc/4,000 mm, and diesel cars up to 1,500 cc/4,000 mm

40% GST Slab (Luxury & Sin Goods)

• Larger vehicles: petrol cars above 1,200 cc and diesel cars above 1,500 cc

• Motorcycles above 350 cc

• Personal yachts, aircraft, racing cars

• Select luxury items including premium automobiles, tobacco and cigarettes

Special Provision

• Tobacco, gutkha and related products will continue under the 28% GST plus compensation cess until all revenue loss loans are repaid.

No Change

• Electric vehicles (retain 5% GST rate)

Government’s Rationale

Sitharaman said, “The GST rationalisation aims to support households, encourage insurance adoption, and address inverted duty structures while ensuring fiscal sustainability.”

Revenue Secretary Arvind Shrivastava estimated the rationalisation would have a revenue implication of around ₹48,000 crore, but assured buoyancy and sustainability.

Bihar Deputy CM Samrat Choudhary confirmed all states supported the decision, while UP Finance Minister Suresh Khanna said the levy on demerit goods beyond 40% would be decided later.

The 56th GST Council meeting, lasting nearly 10.5 hours, concluded with consensus between the Centre and states on these key tax reforms.

Effective Date: September 22, 2025 (Navratri Day 1), except for tobacco, gutkha and cigarettes, which retain existing cess until loan repayment.