India’s GST Council, led by Finance Minister Nirmala Sitharaman, has unveiled a landmark restructuring of the Goods and Services Tax (GST) system—simplifying the four-tier structure into two main slabs: 5% and 18%, with a special 40% rate for select luxury or sin goods. These changes will come into effect from September 22, 2025, coinciding with the festival season.Reuters+1The Economic TimesThe Times of India
Key Highlights:
- Simplified Tax Slabs: GST now focused on just two main rates—5% and 18%.The Economic TimesThe Times of India
- Luxury Goods Taxed More Heavily: A 40% slab is introduced for premium or “sin goods” like tobacco and high-end cars.The Times of India+1Reuters
- Effective from September 22, 2025.Reutersmint
Sector-Wise Impact
| Sector | Previous GST Rate | New GST Rate |
|---|---|---|
| Daily Essentials | 12–18% | 5% |
| Appliances (TV, AC) | 28% | 18% |
| Insurance (Life & Health) | 12% | Nil |
| Hotel Rooms (≤ ₹7,500) | 12% | 5% |
| Dining Out | 12–18% | 5% |
| Air Tickets (Economy) | 12% | 5%; Business reduced to 12% |
| Apparel (>₹2,500) | 12–18% | 18% (increased) |
| Sin/Luxury Goods | Up to 28% + cess | 40% (no cess) |
- Daily essentials like packaged foods, shampoos, toothpaste, and medicines now taxed at 5%—boosting affordability.Reuterswww.ndtv.comThe Economic Times
- Electronics and appliances such as ACs, TVs, and dishwashers drop from 28% to 18%, potentially reducing prices.The Times of IndiaReuterswww.ndtv.com
- Life and health insurance products are now GST exempt.ReutersThe Times of India
- Budget hotels (rooms ≤ ₹7,500) and economy airfares fall to 5%, with business class airfares reduced to 12%, empowering travel sectors.Navbharat TimesThe Indian ExpressUpstox – Online Stock and Share Trading
- High-end apparel above ₹2,500 now faces an 18% rate, an increase intended for luxury segments.Reuters+1
- Sin and luxury goods such as cigarettes and premium vehicles will now bear a 40% GST, absorbing prior cess.The Times of IndiaPress Information Bureau
Economic Implications
- Stimulates Spending: The reduced tax burden should lift consumer demand and boost the festival shopping season.Reuters+1
- Inflation Cooling: The reform is projected to lower inflation by up to 1.1 percentage points.Reuters
- Investor Sentiment: FMCG companies like HUL and ITC saw stocks surge up to 7% on tax relief expectations.The Economic Times
Final Thoughts
This sweeping GST reform marks one of the most radical simplifications since 2017. With reduced tax slabs, consumers benefit from cheaper essentials and services, while businesses across retail, travel, and FMCG are positioned for growth. However, higher taxes apply to apparel and luxury sectors, balancing revenue needs.
