Finance Minister Nirmala Sitharaman on Wednesday announced sweeping Goods and Services Tax (GST) rate cuts effective September 22.  It covers significant reforms and changes in the Goods and Services Tax (GST) regime aimed at making it more citizen-centric, simplifying tax structure, and promoting ease of doing business.

The GST revamp brings a majority of items in the 5% and 18% slabs, with several items now facing 0% or nil tax and some added to the 40% 'sin tax' slab.

With GST cut on a lot of daily use household items, common man and middle class have big reason to cheer. So what has become cheaper after the rate cuts? 

Here is a gist of the main points:

Next-Generation GST Reforms

- Introduced as a strategic evolution to improve citizens' quality of life and business facilitation.

- Focus on rationalizing GST rates with a simplified 2-tier tax structure: Standard Rate at 18% and Merit Rate at 5%, with a special 40% demerit rate for select goods/services.

Key GST Rate Changes on Goods

- Reduction of GST on common household and personal care items (e.g., hair oil, soap, toothpaste) from 18% or 12% to 5%.

- GST on ultra-high temperature (UHT) milk, prepackaged paneer, and all Indian breads (e.g., chapati, roti) reduced from 5% to NIL.

- Food items like packaged namkeens, pasta, chocolates, ghee, and butter reduced from 12% or 18% to 5%.

- Reduction of GST on cement from 28% to 18%.

- Reduction on small cars and motorcycles (up to 350cc) from 28% to 18%.

- Reduction on agricultural and textile goods such as manmade fibers and yarns from 18% to 5%.

- Significant cuts on fertilizers like sulphuric acid, nitric acid, and ammonia from 18% to 5%.

- Lifesaving drugs and medicines: GST reduced from 12% to NIL for 33 drugs, and 5% to NIL for 3 critical drugs.

- Medical apparatus and devices, including diagnostic kits and bandages, GST cut from 18% to 5%.

- Renewable energy devices and parts reduced from 12% to 5%.

GST Rate Changes on Services

- Hotel accommodation valued at Rs. 7,500 or less per unit/day reduced from 12% to 5%.

- Beauty and physical well-being services (gyms, salons, yoga centers) reduced from 18% to 5%.

- Exemption of GST on all individual life insurance (term, ULIP, endowment) and health insurance policies to improve affordability.

- Some transport and logistics-related services see changes in applicable GST rates.

Implementation Dates and Other Measures

- GST rate changes on services and most goods (except tobacco and certain products) to be effective from September 22, 2025.

- Tobacco products including pan masala, gutkha, cigarettes to continue at existing rates until compensation cess obligations are met.

- Operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT) for appeals by end of September 2025 and hearing commencement by December 2025.

- Measures for facilitation of trade include risk-based provisional refunds for zero-rated supplies and inverted duty structure refunds, starting November 1, 2025.

- Introduction of simplified GST registration schemes for small and low-risk businesses.

- Amendment in place of supply provisions for intermediary services, aiding exporters.

- Clarifications on post-sale discounts and input tax credit treatment issued.

Sector-Specific Rationalization

- Detailed HSN-wise rationalization across key sectors: food, tobacco, agriculture, fertilizer, renewable energy, textiles, healthcare, education, consumer electronics, transportation, handicrafts, defence, footwear, and construction.

- GST rate cuts largely benefit common-man items, essential health goods, agricultural equipment, renewable energy, and labor-intensive sectors.

Summary

- The reforms make GST simpler, more uniform, and more focused on promoting welfare and economic growth.

- Large number of commonly used consumer goods now attract lower GST rates or are exempted.

- Facilitation measures aim to ease compliance and improve efficiency in tax refunds.