GST 2.0 from September 22 brings major tax changes. Find out how your grocery and shopping bills will change from today with all you need to know.
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NEW DELHI: India’s GST regime is getting a major overhaul from today, (September 22, 2025), with the introduction of GST 2.0. The government promises a simpler structure, fewer disputes, and cheaper goods and services for households. But will the benefits truly reach the consumers’ pockets?
ALSO READ: GST Revision 2025: What Becomes Cheaper, What Gets Expensive? | Explained
From Four Tiers to Two: Simplifying Taxation
The earlier four-tier GST system of 5%, 12%, 18%, and 28% often confused, especially in classifying goods. GST 2.0 simplifies this into two broad slabs:
- 5%: Essentials and daily-use items like food grains, medicines, basic dairy products, and educational materials.
- 18%: Standard goods and services, including manufacturing, transport, and general consumer services.
- 40%: Ultra-luxury and sin goods, including tobacco, pan masala, aerated drinks with sugar, luxury vehicles, gambling, casinos, and online gaming.
According to the Union Finance Ministry, states will notify their respective SGST rates to align with this new framework.
What Gets Cheaper?
Under GST 2.0, households can expect relief across various categories:
Food and Dairy
- Tax-free: UHT milk, chapati, paratha, parotta.
- 5% GST: Butter, ghee, paneer, cheese, packaged foods like pasta, biscuits, chocolates, cornflakes, namkeens, and bhujia.
Dry Fruits and Sugar Products:
- 5% GST: Almonds, cashews, pistachios, dates, refined sugar, and confectionery (previously taxed at 12%).
Healthcare and Education:
- Life-saving drugs, medical devices, and books are either tax-free or taxed at 5%.
Consumer Durables:
- Washing machines, dishwashers, and televisions drop from 28% to 18%.
- Hair oil, shampoos, toothpaste, and dental floss move to 5%.
Automobiles:
- Small cars and bikes with engines up to 350cc drop from 28% to 18%.
- Life and health insurance policies become tax-free.
Housing and Construction:
- Fertilizers, seeds, crop inputs, and construction materials move from 12% to 5%.
Services:
- Hotel tariffs under Rs 7,500 and economy air tickets now attract 5% instead of 12%.
| Category | Examples |
|---|---|
| Food & Beverage | Nil GST on chapati, paranthas, UHT milk, paneer, pizza bread, khakra; 5% on butter, cheese, ghee, juices, cereals, namkeen, etc. |
| Household Items | Items like tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture, and combs will see a GST reduction from 12% to 5%. Similarly, shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap, and hair oil will now attract only 5% GST, down from 18%. |
| Electronics & Appliances | 18% on air-conditioners, TVs, dishwashers (down from 28%). |
| Stationery & Education | Nil on maps, globes, pencils, crayons, notebooks; erasers also now nil. |
| Footwear & Textiles | 5% GST (down from 12%). |
| Healthcare | 5% or nil on life-saving drugs, thermometers, oxygen, diagnostics, glucometers, and spectacles. Life & health insurance is now GST-free. |
| Insurance & Services | Life & health insurance – nil; third-party insurance for goods carriage – 5%. |
| Hospitality & Travel | GST has been reduced from 12% with ITC to 5% without ITC. Hotel rooms priced up to Rs 7,500 will now attract 5% GST, and economy class flight tickets will also be taxed at just 5% |
| Automobiles & Components | 18% on small cars (≤350 cc) and motorcycles (≤350 cc); 18% uniform on auto parts. EVs remain 5%. |
| Construction & Agriculture | 5% on cement, tractors, agricultural machinery, fertilizers (sulphuric acid, nitric acid, ammonia), biopesticides, irrigation equipment, tractor parts. |
| Beauty & Well-being | 5% on shampoo, toothpaste, soap, kitchenware, feeding bottles, utensils, bamboo furniture, combs, and umbrellas. |
What Becomes Costlier?
Certain goods and services will see a spike in taxes:
- Luxury and sin goods: Cigarettes, gutkha, zarda, pan masala, and aerated sugary drinks are now taxed at 40%.
- Coal: 5% → 18%.
- Large bikes and luxury cars: Now 40%.
- Leisure and gaming: Casino, horse racing, lottery, and IPL tickets are taxed at 40%.
Dr. Kavitha R Gowda, Associate Professor at Alliance School of Business, notes:
“The two-rate system of 5% and 18% is designed to make taxes clearer and more predictable, helping students, families, and education partners. Many food and health products are now taxed at 0% or 5%, easing household expenses.”
| Category | Details |
|---|---|
| Carbonated & Caffeinated Drinks | Soft drinks, caffeinated beverages, and flavoured drinks now taxed at 40% (up from 28%). |
| Luxury Vehicles | Cars above 1,200 cc (and longer than 4,000 mm), motorcycles above 350 cc, yachts, personal aircraft, and racing cars now at 40% GST. |
| Tobacco Products | Remain at 28% GST + compensation cess until loans are cleared; will shift to 40% GST after. |
| Leisure & Gaming Services | Casinos, horse racing, lotteries, online money gaming, and IPL tickets to attract 40% GST. |
Will Companies Pass on the Benefits?
Some companies have promised price cuts:
- Automobile sector: Toyota’s Legender will be cheaper by Rs 3.34 lakh; Mahindra, Maruti, Tata, Hyundai, and even luxury brands like BMW and Mercedes are offering reductions.
- FMCG sector: HUL, P&G, Emami, Amul, and Mother Dairy are reducing prices on select products.
However, a LocalCircles survey from 2018-19 reveals skepticism:
- Only 2 in 10 consumers felt they received benefits from previous GST rate cuts.
- 26% said manufacturers never lowered MRP.
- 15% blamed retailers for not passing on the benefit.
- 32% could not confirm any benefits.
This data suggests that without strong monitoring, the reduced tax burden may not always translate to lower consumer prices.
The survey also highlighted that 8 in 10 consumers want brands to implement mechanisms ensuring that GST reductions reach the end consumer. Nearly 78% believe it is essential for brands to enforce this, rather than leaving it to the government alone.
Conclusion
GST 2.0 simplifies taxation, reduces compliance hurdles, and aims to increase disposable income. Essential goods, healthcare, education, and small consumer durables are expected to be cheaper.
But the key question remains: Will businesses pass the benefits to consumers? Past surveys indicate that only a fraction of GST reductions have historically reached households. Strong enforcement and transparency mechanisms will be crucial to making GST 2.0 a true “Bachat Utsav.”
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