A significant redesign of the Goods and Services Tax (GST) regime has been passed by the GST Council to take effect on September 22, 2025. The new regime will reduce slabs by 5-percent and 18%, and 40% on luxury and sin goods . The reform is expected to increase consumer purchasing, compliance, and economic growth.
Highlights of GST Overhaul 2025.
Simplified Tax Slabs
- 5% GST: This is applicable to most of our day to day basic needs like toilet soap, shampoo, toothpaste, and diary.
- 18% GST: Includes such items as air conditioners, televisions, dishwashers, motorcycles, small cars, and cement (reduced to 18 percent).
- 40% GST: A special tax on some sin and luxury goods, to be used instead of the current Compensation Cess so the government can keep its money.
Impact on Services
- Tourism benefit: Hotel rooms of costs up to 7,500 per night will now only receive 5% GST (without ITC).
- Wellness services: GST is lowered to 5 per cent as opposed to 18 per cent in salons, gyms and yoga centres, making them cheaper.
- Insurance relief: Individual health and life insurance premiums are now completely exempt to the GST.
Sectoral Benefits
- Construction Industry: As cement turns to 18% slab, construction costs will go down by 3-5% and homebuyers and developers will benefit.
- FMCG & Dairy: Several companies such as Mother Dairy have already declared that they will transfer the lower rates to consumers.
Economic Impact
The aim of this GST revamp is to:
- Fewer prices of necessities and consumer goods.
- Grow the disposable income among the households.
- Create demand and consumption.
- Increase credit growth and expansion of the economy.
Conclusion
The GST Overhaul 2025 is one of the biggest tax reforms since the beginning of GST. The government will reduce the rate and structure of essential goods and services by simplifying them in order to directly benefit consumers and also spur economic growth in various sectors.
Month: Current Affairs - September 04, 2025
Category: current affairs daily