Sandipan Mitra is the CEO and co-founder of Pice. He boasts eight years of experience in the B2B and fintech sector. Sandipan's journey includes significant roles at multiple Indian Unicorns Including Product at PayU, and as founding member / VP, Product at Open Financial Technologies.
9 Sep 25
10 mins
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New GST Rates List 2025: Revised GST Slabs from 22 Sept
The New GST Rates List 2025 simplifies taxation into 3 slabs—5%, 18%, and 40%—effective from 22nd September 2025.
Essential goods under the 5% GST slab and many items moving to 0% GST will make daily essentials cheaper for consumers.
Luxury and sin goods face a steep 40% GST rate, ensuring responsible consumption and higher revenue from premium sectors.
The reform benefits MSMEs, FMCG, auto, and healthcare sectors while easing compliance for businesses.
Consumers enjoy affordability, businesses get simplified invoicing, and the economy moves toward a more inclusive GST regime.
As a festive Diwali gesture, the Indian government has announced a significant modification of GST slabs to benefit consumers. Effective September 22, 2025, the existing GST structure will be replaced with simplified slabs, designed to make goods and services more affordable, particularly for middle- and lower-income households.Â
According to the Finance Minister, this reform marks a key step toward easing the tax burden and boosting purchasing power for all. The new GST rates list 2025 introduces 3 main revised Goods and Services Tax slabs. This article breaks down these changes in detail to help you understand what is coming next!
What are the New GST Slabs?
The new GST rate slabs that will be introduced will include the following 3 categories:
5% for essential goods
18% for standard goods and services
40% for sin and luxury goods
The older GST rate slabs that were implemented were:
5% for mass consumption items
12% for processed foods
18% for technical accessories and self-care items
28% for luxury goods
Implications of New GST Rates 2025 for Businesses, Consumers, and Government
For businesses, this means that the invoicing process will be more straightforward. Along with this, the classification of goods disputes is expected to decrease due to the introduction of simpler and fewer categories.
On the other hand, for consumers, this means that there will be less confusion regarding the similar products that are taxed separately. Overall, mass-use items will be taxed at a lower rate compared to before.
Lastly, for the government, the revenue may fluctuate slightly at first, but the planning supports long-term stable revenue.
What are the Things That Will be Cheaper from 22 September 2025?
Goods and Services Covered Under 0% GST Rate
Current GST Rate
Future GST Rate(Applicable from September 22, 2025)
Items
5%
0% Nil
Ultra-High Temperature (UHT) milkPaneer or chena, labelled and pre-packagedPizza breadRoti or chapati and khakhraErasers
12%
0% Nil
Graph book, exercise book, notebooks, and laboratory notebookHydrographic and maps (printed charts) of all kinds, such as wall maps, atlases, globes, and topographical plansPaperboard or uncoated paper is used for making graph books, exercise books, notebooks, and laboratory notebooksPencils (sliding or propelling), pencil sharpeners, pastels, crayons, tailor's chalk, and drawing charcoals
18%
0% Nil
Parotta/paratha or other similar Indian breadsPolished and Natural Cut Diamonds up to 25 cents (1/4 carats) imported under the Diamond Imprest Authorisation SchemeArt and antique worksCommunication devices, including software-defined radios with components and accessoriesMilitary transport aircraft
Goods and Services Covered Under 5% GST Rate
Current GST Rate
Future GST Rate(Applicable from September 22, 2025)
Items
12%
5%
Medical Grade OxygenTractorsDairy Spreads, Butter, Cheese, and GheeSewing Machines and Their PartsDried NutsGlucometer with Test StripsNapkins for Babies, Feeding Bottles, and Clinical DiapersDrip Irrigation Systems and SprinklersAll Types of Diagnostic Kits and ReagentsIndian Railway or tramway sleepers of woodFuel cell motor vehiclesUtensilsCorrective SpectaclesSpecified Bio-Pesticides and Micro-NutrientsAgricultural, Forestry, or Horticultural Machines for Harvesting, Cultivation, Soil Preparation, and ThreshingPackaged Namkeens, Mixtures, and BhujiaNon-packaged or packaged coconut water
18%
5%
Shampoo, Hair Oil, Toilet Soap Bar, Toothpaste, Shaving Cream, and ToothbrushesThermometerTractor Parts and TyresNatural HoneyCocoa Powder purely from Cocoa Beans
Items That Will be under 18% GST
Current GST Rate
Future GST Rate(Applicable from September 22, 2025)
Items
28%
18%
*BidiAir-conditioning (AC) machines, which include an electric motor-driven fan and elements for changing the temperature and humidityDish washing machinesTelevision sets, including LCD and LED televisions, monitors and projectors, and similar goodsNew pneumatic tyres, of rubber [other than of a kind used on/in bicycles, cycle-rickshaws and three-wheeled powered cycle rickshaws; rear tractor tyres; and of the type used on aircraft.Road tractors for semi-trailers with an engine capacity of more than 1800 ccPetrol, liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm.Three-wheeled vehiclesChassis fitted with engines, for the motor vehicles of headings 8701 to 8705Bodies (including cabs), for the motor vehicles of headings 8701 to 8705Motorcycles of engine capacity (including mopeds) and cycles fitted with an auxiliary motor, with or without side-cars, of an engine capacity not exceeding 350cc; side carsRowing boats and canoes, Seats of a kind used for motor vehiclesAll dutiable articles intended for personal use
What are the Things that will be Costlier from 22 September 2025?
Goods and Services Covered Under 18% GST Rate
Current GST Rate
Future GST Rate(Applicable from September 22, 2025)
Items
5%
18%
Coal, ovoids, briquettes, and similar kinds of solid fuels that are manufactured from coalLignite, excluding jetPeat and peat litter
12%
18%
Articles of apparel and clothing accessories, which are knitted or not knitted/ crocheted or not crocheted, of sale value more than ₹2500/pieceOther manufactured textile fabrics and cotton quilt articles or sets with a sale value of more than ₹2500/piece.Dissolving grades and chemical wood pulpUncoated paper and paperboard, of a kind used for printing, writing, or other graphic purposesNon-perforated punch-cards and punch tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 4801 or 4803Uncoated kraft paper and paperboard, in rolls or sheets, other than that of heading 4802 or 4803Other uncoated paper and paperboard, in sheets or rolls, not further processed or worked than as specified in Note 3 to this ChapterGreaseproof papers, Glassine papers
Goods and Services Covered Under 40% GST Rate
Current GST Rate
Future GST Rate(Applicable from September 22, 2025)
Items
18%
40%
Other non-alcoholic beverages
28%
40%
*Pan masalaAll goods (Including aerated waters), containing added sugar or other sweetening matter or flavouredCaffeinated BeveragesCarbonated BeveragesCigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutesMotor cars and other motor vehicles principally designed for the transport of personsMotorcycles of engine capacity exceeding 350 ccYachts and other vessels for pleasure or sports
Things with No Changes in GST Rate
Items
Current and Future GST Rate
Apparel articles and clothing accessories which are knitted or not knitted/ crocheted or not crocheted of sale value not more than ₹2500/pieceOther manufactured textile articles or sets of sale value not more than ₹2500/pieceCotton quilts for sale, with a value of not more than ₹2500/piece
5%
Footwear of sale value no more than ₹2500/pair
18%
Who Will Benefit From the GST Reform Bill?
The common people or consumers of the country will primarily benefit from this GST Reform Bill. Other groups in the Indian economy that will also benefit from this tax structure reform include:
FMCG Sector
Auto Sector, including small car makers, two-wheeler makers, and garages, as parts become cheaper
The ones who might suffer a loss due to these changes include:
Sugary Beverage Companies
Luxury Car Makers
Why is the GST Slab Change Happening?
According to India’s Finance Minister Nirmala Sitharaman, these GST rate cuts are guided by the principle of making daily-use items more affordable for the middle and lower-class households of the country.
This change also benefits Micro, Small, and Medium Enterprises (MSMEs) in India and aims to promote national independence. All items that contribute to the Indian economy at large have seen changes in their tax rates, including life and health insurance.
This change also highlights India’s Seven Pillars of Next Generation GST Reforms:
Building on the success of GST
Rationalising rates for fairer taxation
Simplifying filing through technology
Putting consumers first
Empowering MSMES and manufacturers
Stronger states, stronger Bharat
Lower taxes = Higher spending
Furthermore, the reforms as per the GST council are expected to influence nearly all these pillars, with the possible exception of the technology sector. In the coming months, the main focus will be on how this reform shapes the financial landscape of the country.
Importance of the Change for the Indian Economy: Positives and Negatives
The new GST rates list 2025 that has been announced brings forth the thought of making goods more affordable. There are particular positives that this change brings, which are as follows:
Lower GST rates in India will lead to lower prices and increased consumption.
Lower rates will also help boost manufacturing and MSMEs.
There will be increased incomes for farmers and food processors, as many food items have seen a decrease in tax rates.
On the other hand, it becomes necessary to observe how these changes will unfold in the future. Some of its potential negative impacts can be as follows:
This change can lead to potential revenue loss for the government, as taxes on many day-use items with constant demand have decreased.
Businesses in lower-tax brackets may face Input Tax Credit (ITC) challenges, as they will not be eligible to file for ITC, which can impact their profit margins.
The sudden shift in tax rates will cause operational challenges for businesses, which may include issuing credit notes according to the new structure or relabeling products.
The New GST Rates List 2025, effective from 22nd September, simplifies taxation with three slabs while reducing costs on essential goods. This reform eases consumer spending, supports MSMEs, and streamlines business operations, though some industries may face short-term challenges.
By taxing luxury and sin goods more heavily, the government strikes a balance between inclusivity and responsible consumption. Ultimately, the reform aims to boost affordability, encourage local growth, and create a more consumer-friendly economy.
💡If you want to streamline your payment and make GST payments via credit, debit card or UPI, consider using the PICE App. Explore the PICE App today and take your business to new heights.
FAQs
What are the new GST slabs in India 2025?
The New GST Rates List 2025, effective from 22nd September 2025, introduces three simplified slabs—5% for essential goods, 18% for standard goods and services, and 40% for sin and luxury goods. This reform replaces the earlier 5%, 12%, 18%, and 28% structure. The change aims to reduce consumer confusion, ease compliance for businesses, and make daily-use goods more affordable.
Which items will be cheaper after the GST rate changes in September 2025?
From 22nd September 2025, several goods and services will become cheaper under the new GST rate slabs. Essential items like UHT milk, paneer, notebooks, crayons, spectacles, shampoo, toothpaste, and agricultural machinery move to 0% or 5% GST. This will reduce household expenses and benefit middle- and lower-income families across India.
Which items will get costlier due to the new GST reforms 2025?
Certain products will face higher taxes under the new GST regime. From September 2025, coal, clothing above ₹2500, paper products, luxury cars, carbonated beverages, pan masala, and cigarettes will attract 18% or 40% GST rates. These changes target luxury and sin goods to balance affordability for essentials while ensuring steady government revenue.
How will the new GST rates impact businesses in India?
For businesses, the GST reform 2025 means simplified invoicing and reduced disputes in product classification. With fewer slabs, compliance becomes easier for MSMEs, FMCG, and auto sectors. While some businesses in lower tax brackets may face Input Tax Credit (ITC) challenges, overall the reform is expected to boost consumption, support manufacturing, and strengthen MSMEs in India.
Why did the Indian government introduce new GST slabs in 2025?
The government introduced the GST slab changes in 2025 to make goods and services more affordable, especially for middle- and lower-class households. The move supports the principles of fairer taxation, consumer-friendly policies, and MSME empowerment. By lowering GST on essential goods and increasing it on luxury items, the reform ensures inclusivity while promoting economic growth and responsible consumption.
Sandipan Mitra is the CEO and co-founder of Pice. He boasts eight years of experience in the B2B and fintech sector. Sandipan's journey includes significant roles at multiple Indian Unicorns Including Product at PayU, and as founding member / VP, Product at Open Financial Technologies.
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