GST 2.0 Goes Live: Rate Cuts on Essentials, Food, and Services

India’s Goods and Services Tax (GST) system has seen a major overhaul, effective 22 September 2025. Nearly 400 products will now cost less as the government introduces a simplified GST structure aimed at making essential goods more affordable and easing compliance for businesses.

Visible Savings for Consumers

To ensure shoppers feel the impact of these changes, retailers are required to clearly display GST-related discounts on receipts under the heading “GST Discount.” Beyond the billing counter, promotional campaigns through posters, flyers, and advertisements are encouraged, highlighting the price reductions. The goal is to make the benefits of the new tax system tangible and transparent.

Timing with the Festive Season

The implementation of these changes coincides with the festive season, beginning with Navaratri on 22 September. This timing is strategic, as it is expected to boost consumer spending and retail sales. Retailers are advised to monitor sales volumes during this period and share data publicly to showcase the benefits of the GST overhaul.

The New GST Rate Structure

Previously, GST in India had four slabs: 5%, 12%, 18%, and 28%. The new structure has been streamlined into three main rates, with a special higher rate for luxury and sin goods:

• 0% GST: Essential items such as fresh milk, bread, eggs, certain life-saving medicines, educational and healthcare services.

• 5% GST: Commonly used goods including packaged food, household products like soap and toothpaste, hair care products, and services such as gyms and salons. Clothing and footwear priced up to ₹2,500, along with agricultural machinery and hotel stays under certain tariffs, also fall under this rate.

• 18% GST: Consumer durables, most vehicles including small cars and motorcycles, and a majority of services.

• 40% GST: Luxury and sin goods including high-end vehicles and aerated beverages.

This simplified system ensures essentials remain affordable while still allowing for revenue collection from higher-end products.

Calculate GST on revised rates

Here's sector-wise breakdown of GST rate reductions:
 

Consumer Impact

For shoppers, these reforms mean noticeable savings on everyday essentials, personal care items, packaged foods, and certain appliances. The requirement for visible GST discounts strengthens transparency, helping consumers associate lower prices directly with the tax changes.

Retailers and Compliance

For retailers, the simplified GST structure reduces the complexity of billing and compliance. At the same time, clearly showing discounts offers a subtle marketing advantage, fostering trust and encouraging repeat visits, particularly during the festive season.

Looking Ahead

The GST reforms of 2025 mark a significant step towards a simpler and more consumer-friendly tax system. By reducing the number of tax slabs and lowering rates on essential goods, the government aims to make everyday items more affordable for the public. Retailers play a crucial role in ensuring that these benefits are communicated effectively to consumers, fostering a transparent and trust-based relationship.

As the festive season approaches, both consumers and retailers will be watching closely to see how these changes translate into savings at the checkout counter. The success of these reforms will depend on their effective implementation and the active participation of all stakeholders.