The GST Council has approved a major overhaul—effective 22 September 2025—with a two-tier structure of 5% and 18%, plus a 40% slab for sin/luxury goods. About 90% of products now fall under lower rates. Experts say this could lift GDP growth by 20–30 bps in FY26 and help counter external shocks like US tariffs.
🔑 Sector-wise Highlights
- Healthcare 🏥: Health & life insurance now fully exempt. Medical products like thermometers cut to 5%. Affordability boost for households.
- Consumer Staples 🛒: Daily items (shampoo, soap, toothpaste, dairy) down to 5% from 12–18%. Direct relief to households.
- Education 📚: Notebooks, maps, globes become tax-free; geometry boxes & school items reduced to 5%.
- Automobiles 🚗: Small cars, hybrids & bikes ≤350cc down to 18% (from 28%). Tractors, tyres & parts at 5%. Boosts middle-class demand.
- Agriculture 🌾: Drip irrigation & farm equipment cut to 5% (from 12%). Farmers benefit via lower costs.
- Electronics 📺: ACs and TVs (>32”) now at 18% (from 28%). Festive demand expected to rise.
- Services 🏨: Hotels ≤₹7,500/night, gyms, salons & yoga taxed at 5% (from 12–18%).
✅ Merits
- Lower household expenses and improved affordability.
- Boost to autos, consumer goods, durables, and farm sector.
- CPI inflation may fall by 40–45 bps.
- Supports consumption-led growth.
⚠️ Challenges
- Estimated fiscal impact ~₹48,000 crore (0.13% of GDP).
- States may face revenue pressure, relying on higher consumption.
- 40% slab on sin & luxury goods could dent demand.
- Smaller businesses may struggle with compliance changes.