New Delhi: The Goods and Services Tax (GST) Council has announced a sweeping revision of tax slabs, effective September 22, 2025, bringing relief to households, farmers, and the healthcare sector, while tightening rates on luxury items and tobacco products.
Higher Tax Burden on Luxury and Sin Goods
Luxury items along with pan masala, gutkha, cigarettes, chewing tobacco, zarda, and bidis will see an increase in GST, making them costlier. Officials said the move is aimed at discouraging consumption while generating additional revenue.
Insurance Gets Full GST Exemption
In a landmark decision, the government has removed GST on all life and health insurance products, including term plans, ULIPs, endowment schemes, family floater policies, senior citizen covers, and re-insurance. The exemption is expected to boost insurance penetration and make financial protection more affordable.
Auto Sector Reforms
The automobile industry will see a big shift in rates. GST on buses, trucks, and ambulances has been slashed from 28% to 18%. All auto parts will now be taxed at a uniform 18%, eliminating confusion over varying HS codes. Three-wheelers, small cars, and motorcycles up to 350cc have also been brought down to the 18% bracket.
Relief for Healthcare
Prices of critical medicines will drop as GST on 33 life-saving drugs has been removed. Additionally, three cancer and rare-disease treatments have been moved from the 5% slab to zero. Corrective eyewear such as spectacles and prescription goggles will now attract just 5% GST, compared to 28% earlier.
Boost for Agriculture
Farmers will benefit from lower tax rates on tractors, harvesters, threshers, balers, composting machines, and other essential equipment, with GST cut from 12% to 5%. Twelve bio-pesticides and natural menthol have also been shifted to the 5% bracket.
Handicrafts and Labour-Intensive Industries
To support traditional sectors, GST has been reduced from 12% to 5% on marble, granite blocks, and intermediate leather products, providing a cushion to small manufacturers and artisans.
Middle-Class Gains
Products long seen as aspirational for middle-class families, such as air-conditioners, televisions of all sizes, and dishwashers, have been shifted from the 28% slab to 18%, making them significantly more affordable.
Everyday Essentials Get Cheaper
In a major relief for households, hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, and other daily-use items have all been moved to the 5% slab. Ultra-high temperature milk, paneer, and chena will now be tax-free. All varieties of Indian breads have been exempted.
Processed Foods and Packaged Items
Popular packaged food items such as namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, cornflakes, butter, ghee, and preserved meat will now fall under the 5% slab, down from 12–18%.
What It Means
Experts say the latest restructuring signals a consumer-friendly turn in GST policy, balancing revenue needs with affordability. While tobacco and luxury buyers face a heavier burden, the average household, farmers, and patients stand to gain significantly.
