GST

Goods and Services Tax (GST) is a unified collection mechanism to simplify tax compliance and administration for businesses of all sizes. Prior to its implementation, there were nearly 45 tax slabs across States. 

GST Rates are decided at the GST Council meetings once the recommendations are tabled before the GST Council by the Fitment committee.

There are primarily 5 GST rate slabs in India - 5%, 12%, 18% and 28% with the top two accounting for three-fourths of the revenue.

The Government announced sweeping GST rate reductions on nearly 400 goods and services with Sept 22nd, 2025 as the implementation date. Highlights -

  • Products like Ultra-High Temperature (UHT) milk, Pre-packaged and labelled chena or paneer, all the Indian Breads will see NIL rates
  • Food items such as packaged namkeens, Bhujia, Sauces, Pasta, Chocolates, Coffee, Preserved Meat etc. reduced from 12% OR 18% to 5%.
  • Health and life insurance policies purchased by individuals will now be fully exempt from GST. 
  • In FMCG, there could be an average price reduction of about 10% for consumers. Urban consumers who represent 30% of the population but account for nearly 70% of packaged goods consumption will particularly feel this positive impact.
  • Apparel and footwear priced up to Rs 2,500 is moved to the 5% slab. Products which cost above Rs 2,500 will be taxed higher at 18%.
  • GST is exempted on 36 medicines and reduced from 12% to 5% for a wide range of other medicines. Patients can expect an average reduction of around 7% on prices of medicines.
  • Hotel room rates below Rs 7,500 a night will attract 5% GST, down from 12%. 
  • GST on cement has been lowered from 28% to 18%.
  • GST on premium economy, business and first-class air tickets is being increased from 12% to 18%.
  • GST on bidis has gone down from 28% to 18% while for cigarettes and tobacco it is raised from 28% to 40%. 
Following the implementation, more than 99% of goods & services under GST regime are either exempt or fall under 5% & 18% GST slab. Sin goods will be under 40% tax slab. 

The GOI is putting ₹93,000 crore in revenue at risk and States will bear 70% of this risk. Private consumption made up 61% of GDP last year. With these cuts if demand rises, the potential gains could outweigh the losses.   

GST Rates for Various Products Prior to Sept 22, 2025:

Gold: 3% on value, additional 5% on making charges for ornaments (total 8%)

Vehicles: Electric vehicles (EVs): 5% GST, Hybrid cars: 48% GST

Food items: 0-18% depending on the type (e.g., 5% on dried packaged vegetables, 18% on chocolate). Namkeen: 12% for registered brands, 5% for unregistered brands

TVs: 18% for up to 32 inches, 28% for larger sizes

Highest rate: 28% (applies to automobiles, tobacco, aerated beverages, air travel)

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then for the Law to evolve. In 2017, the GST Bill was passed in the Lok Sabha and Rajya Sabha and the GST law came into force from 1st July 2017.

GST taxpayer base has grown from 66.5 lakh in 2017 to 1.51 crore in 2025.