The GST Council has officially approved a major overhaul of the tax structure in its 56th meeting, held on 3rd September, bringing long-awaited reforms that simplify slabs and make compliance easier for businesses. The new GST rates are now in effect starting from September 22, 2025.
Effective date of new GST rates
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Date of Implementation |
22nd September 2025 |
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Date of GST Council Decision |
3rd September 2025 |
The new GST structure at a glance
India has moved from the earlier four-tier GST system (5%, 12%, 18%, 28%) to a simplified two-rate structure:
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5% (Merit rate) – Essentials and mass-consumption goods
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18% (Standard rate) – Most other goods and services
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40% (Special rate) – Select luxury and sin goods (e.g., aerated drinks, high-end vehicles, tobacco, casinos, IPL tickets)
This rationalisation is aimed at:
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Reducing compliance complexity
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Boosting domestic spending
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Cushioning India’s economy against the impact of US tariffs on Indian goods
What gets cheaper with GST 2.0?
| Category | Items | Old GST Rate | New GST Rate |
|---|---|---|---|
| Food & Beverage | Chapati, paratha, UHT milk, paneer, pizza bread, khakra | 5% | 0% |
| Butter, ghee, dry fruits, condensed milk, meat, sugar confectionery, jam, tender coconut water, namkeen, packaged water, juices, ice cream, biscuits, corn flakes, cereals | 18% | 5% | |
| Cheese, other edible fats, plant-based milk beverages, soya milk drinks | 12%–18% | 5% | |
| Household Items | Tooth powder, feeding bottles, kitchenware, umbrellas, utensils, bicycles, combs | 12% | 5% |
| Shampoo, talcum powder, toothpaste, soaps, hair oil | 18% | 5% | |
| Household Appliances | Air conditioners, dishwashers, televisions | 28% | 18% |
| Stationery | Maps, charts, globes, pencils, sharpeners, crayons, notebooks | 12% | 0% |
| Erasers | 5% | 0% | |
| Footwear & Textiles | Mass-market footwear and textiles | 12% | 5% |
| Healthcare | Life-saving medicines, medical devices, thermometers, diagnostic kits, corrective eyewear | 12%–18% | 5% or 0% |
| Insurance | Individual life and health insurance policies | Varies | 0% |
| Third-party insurance for goods carriers | 12% | 5% | |
| Hotel & Travel | Hotel stays up to ₹7,500 | 12% | 5% |
| Economy class airfares | Varies | 5% | |
| Vehicles & Fuel | Motorcycles up to 350cc, small hybrid cars | 28% | 18% |
| Auto parts | 28% | 18% | |
| Small petrol and diesel cars | 28% | 18% | |
| Construction | Cement | 28% | 18% |
| Agriculture | Sewing machines, farm machinery, fertiliser inputs (sulphuric acid, etc.), bio-pesticides, micro-nutrients, tractor components | 12%–18% | 5% |
| Services | Salons, barber shops, gyms, fitness centres, yoga services | 18% | 5% |
Food & beverages
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Nil rate: Chapati, paranthas, UHT milk, paneer, pizza bread, khakra
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5% (down from 18%): Butter, ghee, dry fruits, jam, juices, ice cream, biscuits, cereals, sugar confectionery, namkeen, packaged water, milk-based beverages
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5% (down from 12%): Cheese, plant-based milk drinks, soya milk drinks
Household items
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5% (down from 12%/18%): Tooth powder, soap, shampoo, hair oil, talcum powder, feeding bottles, utensils, bicycles, combs, umbrellas, bamboo furniture
Appliances & electronics
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18% (down from 28%): ACs, dishwashers, TVs
Stationery
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Nil rate: Notebooks, pencils, erasers, maps, charts, crayons
Footwear & textiles
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5% (down from 12%): All footwear and textiles
Healthcare
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Nil to 5% (down from 12–18%): Life-saving drugs, diagnostic kits, medical oxygen, thermometers, corrective spectacles, health & life insurance policies
Travel & hospitality
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5% (down from 12%): Hotel rooms up to ₹7,500, economy class air tickets
Automobiles & components
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18% (down from 28%): Motorcycles up to 350cc, small hybrid cars, auto components
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5%: Electric vehicles (unchanged)
Agriculture
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5% (down from 12–18%): Tractors, irrigation equipment, fertiliser inputs, biopesticides, tractor components
Services
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5% (down from 18%): Salons, health clubs, gyms, yoga centres
What gets costlier with GST 2.0?
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40% (up from 28%): Aerated & caffeinated drinks, beverages with added sugar, non-alcoholic beverages
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40% (up from 28%): Large cars (above 1,200cc / 4,000 mm), motorcycles above 350cc, yachts, aircrafts for personal use, racing cars
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40% (after cess removal): Tobacco products (once compensation cess period ends)
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40%: Casinos, gambling, online gaming, race clubs, IPL tickets
The three pillars of GST reforms
The centre has designed the reforms around three focus areas:
- Structural reforms – Correcting inverted duty structures, resolving classification disputes, and providing predictability in taxation.
- Rate rationalisation – Reducing taxes on commonly used and aspirational goods while bringing stability in slabs.
- Ease of living for taxpayers – Easier startup registrations, pre-filled returns, and faster refunds.
What this means for TallyPrime users?
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Instant updates: The new GST rates will be available to update in TallyPrime before September 22. Updating your business data is quick and hassle-free.
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Automatic compliance: From invoicing to filing, TallyPrime ensures your GST calculations reflect the latest government rules.
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Error-free filing: With pre-filled reports, reconciliation tools, and automated checks, compliance remains smooth.
