India will streamline its GST tax structure to only 5% and 18% slabs from September 22, 2025, replacing the previous four-level system and introducing a separate 40% sin tax for luxury and harmful products. This ambitious reform aims to simplify compliance, reduce confusion for small traders, and increase ease of living for citizens. Essential goods like food, medicines, basic toiletries, educational supplies, and agricultural implements are set to be cheaper or exempt, while individual life and health insurance policies and numerous life-saving drugs move out of the GST net entirely.
The move should free up more disposable income for the general public and boost economic activity, with the government projecting a ₹48,000 crore revenue impact. Items such as TVs, ACs, and small bikes will see a reduced 18% tax, while luxury cars, tobacco, and sugary drinks fall under the higher 40% rate. This overhaul comes after the government found that the discontinued 12% slab yielded minimal revenue and the 28% category discouraged healthy economic activity.
GST slabs cut to two (5% and 18%), plus a separate 40% tax for luxury and sin goods
Daily essentials, educational supplies, and farm implements face reduced tax or exemption
Life and health insurance policies, many life-saving drugs now fully GST-free
TVs, ACs, small vehicles moved to lower 18% slab
Luxury items, tobacco, large cars/bikes to pay 40% GST
Expected to boost ease of living, support small traders, and leave more money in citizens' hands
Government estimates a ₹48,000 crore revenue impact from the reforms
