GST 2.0 Unpacked: The Cheaper vs. Costlier List
The Goods and Services Tax (GST) was a revolutionary move to simplify India’s complex tax structure by consolidating various indirect taxes. Its primary goal was to foster a more robust business ecosystem, making India a global business hub. At the 56th GST Council meeting, landmark reforms under GST 2.0 were announced and approved, coming into effect on September 22, 2025.
The Goods and Services Tax (GST) is a unified taxation system introduced with the vision of simplifying India’s complex tax ecosystem by consolidating multiple indirect taxes into a single one. As a result, GST has replaced multiple existing taxes, including Value Added Tax (VAT), Excise Duty, and Service Tax, among others.
The main reason behind the introduction of GST was to enhance the overall efficiency by streamlining the business ecosystem or improving ‘Ease-of-Doing-Business’ in India. Although there have been many confusions among Small and Medium Business owners about this tax reform from the date it came into existence, it was a revolutionary transformation in the Indian taxation landscape.
Goods and Services Tax rates impact consumer spending and various sectors, eventually affecting every segment of the economy. This is the reason, Indian businesses and consumers alike keep a keen watch on each GST Council meeting to be aware of the changes that take place in the set of GST rates.
GST Council Meeting 2025
The GST Council Meeting is typically held every few months, almost every year. The meeting is conducted to discuss the goods/services GST rate slab and make changes in product rate as per the current economic scenario of the nation. Furthermore, the finalized changes/alterations in the GST law are implemented on the ground level.
Held on September 03, 2025, the 56th GST Council meeting brought great relief for the people and businesses, which they had been expecting for a long time. The council simplified the GST rate structure from the previous four slabs to two main slabs, making it simpler.
GST 2.0- Next Gen GST
India’s Taxation landscape has met a landmark transformation with the rollout of GST 2.0- the Next Gen GST Reforms. Announced in the 56th GST Council meeting, this GST reform aims to simplify this complicated taxation system by significantly cutting back on GST tax slabs from the four original rates (5%, 12%, 18% & 28%) to two main rates (5% & 18%). However, apart from these two main slab rates, a special GST rate of 40% is introduced for certain products, such as sin goods and luxury goods.
- 18% (Standard Rate)- This GST rate is applicable to most of the goods and services.
- 5% (Merit Rate)- GST rate on Essential items and priority sectors has been reduced to this slab rate, giving a huge relief to the consumers.
- 40% (Demerit Rate)- The 40% GST rate proposed for sin and luxury goods aims to partly subsume the earlier Compensation Cess components on these items, moving towards a simpler slab structure while preserving revenue neutrality.
With this next-generation GST reform, the GST taxation landscape has witnessed the most comprehensive overhaul of GST rates since its introduction. Consequently, it will significantly impact the consumer behaviour, cash flows, and competitive positioning across almost every sector, contributing to the Indian Economy.
Key Highlights of 56th GST Council Meet
- In a landmark move, the GST on individual health and life insurance policies has been exempted under GST 2.0, offering consumers a direct saving of up to 18%, marking one of the largest relief measures introduced in recent tax reforms.
- Dairy Products, 33 Lifesaving Drugs, and Educational Essentials are now free from GST.
- The GST on Electronic Appliances, Small Cars, and Motorcycles (≤350cc) has been reduced to a lower tax slab of 18%.
- According to the GST Council’s press note and proposals, coal rates may be revised from 5% to 18%. Final implementation awaits official notification from CBIC.
- For sin goods such as Pan Masala, aerated water, caffeinated beverages, and carbonated beverages with fruit juice, a special GST Rate of 40% has been introduced, making these items costlier.
The proposed changes in GST Slab Rates came into effect from 22nd Sept 2025, except tobacco products.
GST Rate Changes from 56th GST Council Meeting
What Gets Cheaper:
From September 22, 2025, onwards, many essential items and services have become cheaper due to the GST rate cut. The following table lists the items/services that have gotten cheaper now due to the reduction in their GST rate:
| S.No | Category | Items | From (%) | To (%) |
|---|---|---|---|---|
| 1 | Daily Essentials | Hair Oil, Shampoo, Toothpaste, Toilet Soap Bar, Tooth Brushes, Shaving Cream | 18 | 5 |
| Butter, Ghee, Cheese & Dairy Spreads | 12 | 5 | ||
| Pre-packaged Namkeens, Bhujia & Mixtures | 12 | 5 | ||
| Utensils | 12 | 5 | ||
| Feeding Bottles, Napkins for Babies & Clinical Diapers | 12 | 5 | ||
| Sewing Machines & Parts | 12 | 5 | ||
| 2 | Uplifting Farmers & Agriculture | Tractor Tyres & Parts | 18 | 5 |
| Tractors | 12 | 5 | ||
| Specified 12 bio-pesticides and micro-nutrients | 12 | 5 | ||
| Drip Irrigation System & Sprinklers | 12 | 5 | ||
| Agricultural/Horticultural/Forestry Machines | 12 | 5 | ||
| 3 | Healthcare Sector | Individual Health & Life Insurance | 18 | Nil |
| Thermometer | 18 | 5 | ||
| Medical Grade Oxygen | 12 | 5 | ||
| All Diagnostic Kits & Reagents | 12 | 5 | ||
| Glucometer & Test Strips | 12 | 5 | ||
| Corrective Spectacles | 12 | 5 | ||
| 33 drugs and medicines (press release) | 12 | Nil | ||
| Agalsidase Beta, Imiglucerase, Eptacog alfa (Factor VIIa drugs) | 5 | Nil | ||
| Faricimab, Pertuzumab, Fluticasone combo, Ocrelizumab, Brentuximab Vedotin | 12 | 5 | ||
| 4 | Automobiles | Petrol & Petrol Hybrid, LPG, CNG Cars (≤1200cc & ≤4000mm) | 28 | 18 |
| Diesel & Diesel Hybrid Cars (≤1500cc & ≤4000mm) | 28 | 18 | ||
| Three wheelers | 28 | 18 | ||
| Motorcycles (≤350cc) | 28 | 18 | ||
| Motor Vehicles for goods transport | 28 | 18 | ||
| 5 | Education | Maps, Charts & Globes | 12 | Nil |
| Pencils, Sharpeners, Crayons & Pastels | 12 | Nil | ||
| Exercise Books & Notebooks | 12 | Nil | ||
| Eraser | 5 | Nil | ||
| 6 | Electronic Appliances | Air Conditioners | 28 | 18 |
| Television (above 32″) (LED & LCD TVs) | 28 | 18 | ||
| Monitors & Projectors | 28 | 18 | ||
| Dish Washing Machines | 28 | 18 |
What Gets Costlier
Certain items or services have been upgraded to a higher tax rate than their earlier GST rate slab. The following table displays such items/services that have become costly from their previous rate due to a hike in their GST Rate:
| S.No | Category | Items | From (%) | To (%) |
|---|---|---|---|---|
| 1 | Mining | Coal, lignite, peat | 5 | 18 |
| 2 | Sin Goods | Tobacco / Pan masala | 28 | 40 |
| Aerated waters | 28 | 40 | ||
| Caffeinated beverages | 28 | 40 | ||
| Carbonated beverages of fruit drinks / with fruit juice | 28 | 40 | ||
| Other non-alcoholic beverages | 18 | 40 | ||
| Motor cars and larger hybrids (beyond small-car thresholds) | 28 | 40 | ||
| Motorcycles exceeding 350cc | 28 | 40 | ||
| Aircraft for personal use | 28 | 40 | ||
| Yachts & vessels for pleasure/sports | 28 | 40 | ||
| Smoking pipes and cigarette/cigar holders | 28 | 40 | ||
| Revolvers & pistols | 28 | 40 | ||
| Admission to casinos, race clubs, IPL etc. | 28% with ITC | 40% with ITC | ||
| Licensing of bookmakers & actionable claims (betting, gambling, lottery, online gaming) | 28% with ITC | 40% with ITC | ||
| 3 | Paper Sector | Dissolving-grade chemical wood pulp | 12 | 18 |
| Various papers/paperboards (other than exercise-book paper) | 12 | 18 | ||
| 4 | Textiles | Apparel / Made-ups > Rs 2,500 per piece | 12 | 18 |
| Quilted/cotton quilts & quilted products > Rs 2,500 per piece | 12 | 18 |
Big Savings with GST 2.0
These next-gen GST reforms, which came into effect on Monday, will help households save big on the purchase of day-to-day essentials including groceries, various other items, and services. According to the Government’s estimate, Indians will save 7-12% on the purchase of stationery, clothes, shoes, and medications, among other items.
While purchasing health and life insurance policies, individuals can expect to save up to 18% due to the exemption of insurance policies from GST. Simply put, this GST reform is estimated to provide relief to both the common people and businesses, ultimately strengthening the Indian economy by giving it a better pace.
Conclusion
In conclusion, GST 2.0 is not merely a tax revision but a significant step towards realizing the original vision of ‘One Nation, One Tax.’ By establishing a balance between simplification, fiscal prudence, and social objectives, it represents a strategic shift aimed at a streamlined and rapidly growing economy. Businesses and consumers who adapt proactively to this new landscape are poised to benefit the most from its long-term advantages.
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