GST 2.0: What India’s Two-Slab Rewrite (5% & 18%) — Effective September 22, 2025 — Means for Your Wallet

India is about to see a big change in the Goods and Services Tax (GST) system. The GST Council has decided to simplify the tax structure by removing the 12% and 28% slabs. From September 22, 2025, there will only be two main GST rates – 5% and 18%, plus a special 40% rate for luxury and sin goods.

This is being called GST 2.0, and it is expected to make life easier for both businesses and consumers. Let’s understand what this means for you in simple words.

What Are the New GST Rates?

Currently, India has multiple GST slabs – 0%, 5%, 12%, 18%, and 28%. This often creates confusion for businesses and customers.

From September 22, the government is introducing a simpler system:

5% GST – For essential and common items
18% GST – For most other goods and services
40% GST – For luxury items and sin goods like tobacco, pan masala, and ultra-luxury cars

Items like milk, paneer, and some basic food products will remain tax-free (0%).

Why is GST Changing?

The main reasons for this big reform are:

To make GST simple – Fewer tax slabs mean less confusion.
To boost spending – Lower GST on many items will make them cheaper, encouraging people to buy more.
To help the middle class – Everyday products will cost less, reducing the monthly budget burden.

However, the government will lose some revenue (around ₹47,000–₹48,000 crore every year), but the aim is to increase economic activity and consumption.

What Will Get Cheaper?

Although the exact list will be notified soon, here are the likely changes:

Household products – Soaps, shampoos, cleaning items
Packaged food – Biscuits, chocolates, and snacks
Electronics – Small appliances like mixers, fans, and maybe some mobile accessories
Automobiles – Small cars and entry-level bikes could see a price drop

If these products were in the 12% or 28% slab earlier, they will now move to 5% or 18%, reducing their prices.

What Will Still Be Expensive?

Not everything is getting cheaper. Some items will continue to be costly:

Tobacco products – Cigarettes, gutkha, pan masala
Luxury cars and items – These will have a 40% GST rate
High-end goods – Premium electronics, luxury fashion items

So, if you’re planning to buy a luxury SUV, don’t expect big savings.

How Will This Affect You?

For most people, the impact will be positive:

Your monthly grocery and essentials bill could reduce slightly.
Home appliances and everyday gadgets may become more affordable.
Eating out or ordering food may not change much since they mostly fall under 5% or 18% already.

However, don’t expect prices to drop overnight on September 22. Businesses need time to update their systems, and some may not pass on the full benefit immediately.

What Businesses Need to Do

If you own a shop or run an online business:

Update your billing software and price lists with the new GST rates.
Check input tax credits for old stock to avoid compliance issues.
Inform your customers about price changes to build trust.

Why Is This Important for You?

This change affects everyone – from big companies to small shopkeepers and every consumer. The government wants to make GST simpler, fairer, and more growth-oriented. For you, it means more clarity and possibly lower prices on many items.

Quick Summary

Date of change: September 22, 2025
Old slabs (12% & 28%) are gone
New slabs: 5%, 18%, and 40% (special)
Winners: Consumers, FMCG sector, small businesses
Luxury and sin goods stay costly

Conclusion

The GST reform is a big step toward simplifying India’s tax system. It’s good news for households as many items will become cheaper. Businesses, too, will find it easier to comply with fewer tax slabs. Keep an eye out for official notifications to see which products fall under the new rates.

So, September 22 is the date to remember. Until then, plan your purchases smartly!