Major GST Structure Changes
Major changes to the Goods and Services Tax (GST) system are coming into effect from 22nd September 2025. The GST Council has reduced India’s GST structure from four slabs (5%, 12%, 18%, 28%) to a simpler two-tier system with only 5% and 18% rates for most goods and services. In addition, a distinct 40% “sin/luxury” rate will apply to selected items such as luxury cars, tobacco products, and certain transport-related goods.
Key Rate Updates and Exemptions
Essential everyday goods like hair oil, soap, toothpaste, cycles, and common household items will now attract just 5% GST.
Individual life and health insurance policies have been fully exempted from GST, making them more affordable.
Construction cement GST has dropped from 28% to 18%, aiming to support affordable housing and infrastructure development.
Indian breads (roti, paratha, paneer) have moved from 5% GST to tax-free (nil), reducing the cost of packaged staple foods.
Sin and luxury goods, including tobacco products and high-end vehicles, are moved to the 40% GST bracket, but some tobacco products will remain at previous rates until compensation cess debts are settled.
Compliance and Rule Changes
Businesses with multiple GST registrations (GSTINs) under one PAN will need to obtain ISD registration starting April 1, 2025.
Multi-factor authentication is now mandatory for logging into the GST portal, enhancing security for taxpayers.
Changes to e-invoice reporting and hotel GST policies have streamlined compliance.
Provisional refund for exporters and faster registration periods for non-risky businesses have been introduced, benefitting MSMEs.
Impact on Citizens and Businesses
These reforms are expected to make essential goods and services more affordable. Small businesses benefit from increased ease of doing business and simpler GST filing, while infrastructure projects get a boost from reduced cement costs. Early estimates suggest the GST changes could increase GDP growth by 100–120 bps in the coming quarters. The government also hopes that lowering costs for the common man will improve overall consumption and support economic growth.