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For Ease of living and to build atmanirbhar Bharat
The 56th meeting of the GST Council, chaired by Union Finance Minister Smt. Nirmala Sitharaman, on 03 September 2025, has approved Next-Gen GST reforms, with a focus on improving the lives of the common man and ensuring ease of doing business for all, including small traders and businessmen. It will come into effect from 22nd September 2025. In his Independence Day address, Hon’ble Prime Minister Shri Narendra Modi had announced, “The government will bring Next-Generation GST reforms, which will bring down tax burden on the common man. It will be a Diwali gift for you.” The reforms, he said, would directly benefit the common man, farmers, MSMEs, women, youth, and middle-class families, while strengthening India’s long-term growth.
Notably, the Goods and Services Tax (GST), introduced on 1st July 2017, is India’s most significant indirect tax reform since Independence. By bringing together multiple central and state taxes into a single, unified system, GST created a common national market, reduced the cascading of taxes, simplified compliance, and improved transparency. Over eight years, GST has steadily evolved through rate rationalisation and digitalization, becoming the backbone of India’s indirect tax framework.
In line with the PM’s Shri Narendra Modi’s vision, the GST Council has recommended a comprehensive reform package that includes rate rationalization with a simplified two-slab structure (5% and 18%), sweeping rate reductions across
PM Modi hails GST council’s
pro-people reforms
The Prime Minister, Shri Narendra Modi expressed his happiness that the GST Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women, and youth. “The wide-ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses”, Shri Modi stated.
The Prime Minister posted on X: “During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.
The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and strengthening the economy.
Glad to state that @GST_Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women, and youth.
The wide-ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses.”
sectors, with focus on common-man, labour-intensive Industries, farmers and agriculture, health, and key drivers of the economy. These recommendations are based on consensus among all members of the GST Council to make GST simpler, fairer, and more growth-oriented. The revised rates and exemptions will come into effect from 22nd September 2025, ensuring timely relief for the common man, households, farmers, and businesses. Only exception will be specified goods, namely, cigarettes, chewing tobacco products like Zarda, unmanufactured tobacco, and beedi, for which the existing rates of GST and compensation cess will continue to apply, and the new rates will be implemented at a later date to be notified, based on discharging of the entire loan and interest liabilities on account of compensation cess.
7 Pillars of Next-Gen GST Reforms
Next-Gen GST reforms build on GST’s success with a simplified 2-tier structure, fairer taxation, and digital filing for ease and faster refunds. They prioritize consumers by lowering rates on essentials and high-value items, empower MSMEs and manufacturers with smoother cash flows, strengthen state revenues, and boost demand driving consumption and manufacturing growth across India.
7 PILLARS OF NEXT-GEN GST REFORMS
1. Building on the success of GST.
2. One Nation, One Tax
3. Expanded the taxpayer base
4. Simpler 2-tier system (5% & 18%)
5. Rationalising rates for fairer taxation.
6. Smoother duty structures
7. Faster processing of refunds
Simplified Structure, Sectoral Relief
The latest reforms mark a major simplification of the GST structure. The shift to a two-slab system of 5% and 18%, removing the earlier 12% and 28% rates, will make taxation more transparent and easier to follow. At the same time, a 40% on luxury and sin goods such as pan masala, tobacco, aerated drinks, high-end cars, yachts, and private aircraft ensures fairness and revenue balance.
Alongside, registration and return filing have been simplified, refunds made faster, and compliance costs reduced, easing the burden on businesses, especially MSMEs and startups.
Here is a sector-wise follow-up of the reforms and their expected impact.
Food and Household Sector
Reforms bring direct savings to households by reducing taxes on everyday essentials and packaged foods. GST rate cut on AC, Dishwashers and TVs (LCD, LED) is a dual
BJP National President welcomes the historic GST reforms
Welcoming the GST reform decision BJP National President and Union Minister Shri JP Nadda said Hon’ble Prime Minister Shri Narendra Modi ji, in his 11th Independence Day address from the ramparts of the Red Fort on 15th August 2025, spoke about the government’s intention to bring next-generation reforms in GST. Under his leadership, in just 20 days, the GST Council carried out historic reforms by either abolishing or significantly reducing taxes on all essential commodities. In the new GST regime, the 28% and 12% slabs have been completely removed. Now, there will be only two tax slabs – 5% and 18%.
He said, “I heartily congratulate Hon’ble Prime Minister Shri Narendra Modi ji for these historic Next Gen GST reforms. I also extend my appreciation to Union Finance Minister Smt. Nirmala Sitharaman, the GST Council, and the Finance Ministers of all Indian states for implementing these reforms on the ground”.
“These reforms will not only improve the lives of our citizens but will also ensure ease of doing business for small traders and enterprises. The goal of our government is not just revenue collection but to improve the quality of life of every citizen of the country. This step will undoubtedly strengthen the nation’s economic power and instil new hope”.
GST on several essential items, including milk and flour, has been reduced to zero. Additionally, taxes on many goods of common use have been brought down from 12%, 18%, or 28% to just 5%. This will lead to a significant reduction in the prices of these essentials and ease the tax burden on the common man. GST on life insurance and health insurance has also been reduced to zero, an important step towards strengthening people’s health and financial security. Taxes on expensive household appliances and vehicles have been substantially reduced.
Agricultural equipment such as tractors, machinery, and harvesting-threshing tools has also seen major tax cuts, giving a new boost to the agriculture-based economy. Tax rates on housing and construction materials have been reduced as well, lowering the financial burden on citizens and strengthening the nation’s economy.
The UPA government could not implement GST because states did not trust the then Congress government. Instead, through VAT, the Congress government burdened poor citizens and traders, while leaving a huge scope for tax evasion. GST, on the other hand, has truly realized the concept of ‘One Nation, One Tax.’
All decisions in GST are taken by consensus. The record GST collection every month shows that the nation is moving rapidly toward economic prosperity. The Congress party’s double standards are evident; its leaders support the decisions in the GST Council, but outside, Rahul Gandhi opposes the very same decisions.
Hon’ble Prime Minister Shri Narendra Modi ji’s vision is different; he prefers taking major steps that provide genuine relief to citizens. By making sweeping revisions in GST rates, Hon’ble Prime Minister Shri Narendra Modi ji has given the people of the country a “bumper gift” ahead of Durga Puja, Dussehra, and Diwali.
win. It increases affordability for consumers while strengthening India’s electronics manufacturing ecosystem.
• Products like Ultra-High Temperature (UHT) milk, Pre-packaged and labelled chena or paneer, all the Indian Breads will see NIL rates
• Household goods like soaps, shampoos, toothbrushes, toothpaste, tableware, bicycles now at 5%.
• Food items such as packaged namkeens, Bhujia, Sauces, Pasta, Chocolates, Coffee, Preserved Meat etc. reduced from 12% OR 18% to 5%
• Consumer durables: TVs (LCD/LED) (> 32’), ACs, dishwashers: 28% to18%.
Home Building & Materials
The cut in GST on cement and construction materials will give a big boost to the housing sector. This will lower the cost of homes and infrastructure projects, making ownership of houses more affordable.
This reform will bring ease of living: Rajnath Singh
Union Mister Shri Rajnath Singh in asocial media post said, “The Government of India under the leadership of PM Shri @narendramodi, has announced the Next-Gen GST reforms to bring relief across sectors.
With tax rates reduced on many important items, this reform will bring ease of living, further strengthen ease of doing business, empower small businesses, and boost India’s self-reliance under Aatmanirbhar Bharat.
I thank PM Shri Modi and the FM Smt. Nirmala Sitharaman for taking this bold decision”.
The move is also expected to spur demand in real estate and create new jobs in construction.
• Cement: 28% to 18%.
• Marble/travertineblocks, Granite blocks, Sand-lime bricks: 12% to 5%
• Bamboo flooring / joinery, Packing cases & pallets (wood): 12% to 5%
GST has significantly reduced taxes: Nirmala Sitharaman
Union Finance Minister Smt. Nirmala Sitharaman in a social media post said, “GST has significantly reduced taxes as compared to the average taxes levied during the pre-GST era, thereby delivering relief across households and sectors alike.”
Automobile Sector
Clearer classification of vehicles and auto parts
will cut down disputes, improve compliance,
and support growth in India’s automotive
manufacturing and exports.
• Small cars, two-wheelers ≤350cc: 28% to 18%.
A truly transformative decision for Bharat: Amit Shah
Union Home and Cooperation Minister Shri Amit Shah in a social media post said, “PM Shri @narendramodi Ji stands for what he commits.
This historic decision of GST rate cuts and process reforms will bring huge relief to the poor and middle class, while also supporting farmers, MSMEs, women and youth.
By simplifying the system and reducing the burden on common citizens, these reforms will not only ensure ease of living but also give a big boost to ease of doing business, especially for small traders and entrepreneurs. A truly transformative decision for Bharat!”
• Buses, trucks, three-wheelers, all auto parts: 28% to 18%.
Agriculture sector
Cheaper machinery and lower rates on biopesticides will help small farmers reduce
costs and encourage sustainable farming practices. Correcting the inverted duty structure on Fertilizer inputs will boost domestic fertilizer production and reduce dependence on imports, strengthening self-reliance in agriculture.
• Tractors: 12% to 5%; tires and parts: 18% to 5%.
• Harvesters, threshers, sprinklers, drip irrigation, poultry & bee-keeping machines: 12% to 5%.
• Bio-pesticides and natural menthol:12% to 5%.
Service sector
Lower GST on hotel stays, gyms, salons, and yoga services will reduce costs for citizens, improve access to wellness, and give a fillip to the hospitality and service industries.
• Hotel stays up to Rs. 7,500/day from 12% to 5%.
• Gyms, salons, barbers, yoga GST cut from 18% to 5%.
Toys, Sports & Handicrafts
Fixing duty structures for man-made fibres will improve the competitiveness of the textile industry, especially in exports. The inverted duty structure in the sector has been corrected with reduction of GST rate on manmade fibre from 18% to 5% and manmade yarn from 12% to 5%.
Further, lower GST rates on handicrafts will support artisan livelihoods, preserve India’s cultural heritage, and promote rural economic growth.
• Handicraft idols & statues: 12% to 5%.
• Paintings, sculptures: 12% to 5%.
• Wooden/metal/textile dolls & toys: 12% to 5%.
Education sector
Education has become more affordable with exercise books, erasers, pencils, crayons and sharpeners moving to 0% GST. This directly supports families and students, ensuring lower costs of learning materials.
Geometry boxes, school cartons, trays: 12% to 5%.
Medical sector
Reduced rates on medicines and medical devices will improve access to healthcare and support domestic manufacturing in the pharma and medical equipment sectors.
• 33 life-saving drugs, diagnostic kits: 12% to 0%.
• Other medicines including Ayurveda, Unani,
Homoeopathy: 12% to 5%.
• Spectacles and corrective goggles: 28% to 5%.
• Medical oxygen, thermometers, surgical instruments: 12–18% to 5%.
• Medical, dental, and veterinary devices cut from 18% to 5%.
Health and life Insurance
GST exemptions on life and health insurance premiums will expand financial protection and support the vision of Mission Insurance for All by 2047.
• GST exemption on premiums for individual life insurance, health insurance, floater plans, and senior citizen policies.
In addition to the above major reforms, several other items have also seen GST rate rationalisation. These include household utilities, smaller consumer products, and industrial inputs.
Next-Gen GST: Benefits for All
The Next-Generation GST reforms are designed not just to reduce tax rates, but to create a virtuous cycle of growth.
• Lower Prices, Higher Demand: Cheaper goods and services increase household savings and stimulate consumption.
• Support for MSMEs: Reduced rates on inputs like cement, auto parts, and handicrafts lower costs and make small businesses more competitive.
• Ease of Living: A two-rate structure means fewer disputes, quicker decisions, and simpler compliance.
• Wider Tax Net: Simpler rates encourage compliance, expanding the tax base and improving revenues.
• Support for Manufacturing: Correcting inverted duty structures boosts domestic value addition and exports.
• Revenue Growth: As seen in past reforms, lower rates with better compliance increase
collections.
• Economic Momentum: Lower costs higher demand larger tax base stronger revenues sustainable growth.
• Social Protection: Exemption of GST on insurance and essential medicines strengthens household security and access to healthcare.
Together, these reforms ensure that GST is citizen-centric, business-friendly, and aligned with India’s global growth ambitions.
Conclusion
The adoption of a simplified GST structure and wide-ranging rate reductions marks a new chapter in India’s tax journey. By focusing on affordability for citizens, competitiveness for businesses, and transparency in compliance, these reforms make GST not just a tax system but a catalyst for inclusive prosperity and economic transformation.
Effective from 22nd September 2025, the reforms reaffirm India’s commitment to building a simpler, fairer, and growth-oriented GST framework, ensuring both ease of living for people and ease of doing business for enterprises.