New GST From Sept 22: Daily Essentials Cheaper, TVs and Cars Get Tax Cut, New 40% Levy on Sin Goods

In a landmark decision, the GST Council on Wednesday approved a sweeping overhaul of India’s indirect tax system, abolishing the 12% and 28% slabs and introducing a simplified two-tier structure with rates of 5% and 18% .

The new regime, which also includes a new 40% slab for “sin” and luxury goods, will come into effect from September 22, the first day of Navaratri, Finance Minister Nirmala Sitharaman announced after the 56th GST Council meeting . The move is expected to make a wide range of daily essentials, electronics, and small vehicles cheaper, providing significant relief to consumers and a boost to several key industries .

“These reforms have been carried out with a focus on the common man,” Sitharaman said, adding that the changes will benefit farmers, the health sector, and labour-intensive industries . Under the restructuring, nearly all items currently taxed at 12%, including staples like ghee, nuts, and some medicines, will now fall under the 5% bracket . In a major relief for households, items like UHT milk and pre-packaged paneer will become tax-free, moving from 5% to nil, while common use products like hair oil, soaps, and toothbrushes will also see their tax rate drop to 5% .

The electronics and auto sectors are also set for a boost, with nearly 90% of goods in the 28% slab moving to the 18% bracket . This includes televisions of all sizes, air conditioners, dishwashers, and cement . Small cars and motorcycles under 350cc will also become cheaper as they move to the 18% slab . However, the Council has introduced a new 40% GST rate for sin and super-luxury goods, which will apply to items like tobacco, pan masala, aerated beverages, and high-end vehicles such as motorcycles exceeding 350cc and yachts .

Prime Minister Narendra Modi hailed the decision, stating that the reforms will improve the lives of citizens and ensure ease of doing business . The move aligns with his Independence Day promise of next-generation GST reforms aimed at simplifying the tax structure and boosting consumption . While the tax cuts are expected to lead to an initial revenue shortfall, policymakers are hopeful that the simplified structure will lead to better compliance and a long-term economic boost