As a sub-broker with Motilal Oswal Financial Services and the curator of hitender.biz, I’m always on the lookout for economic shifts that impact everyday investors, businesses, and consumers. The recent GST Council meeting on September 3, 2025, has delivered one of the most significant tax reforms since GST’s inception in 2017. Announced by Finance Minister Nirmala Sitharaman, these changes simplify the tax structure and aim to make life easier for the common man[1][2][3]. If you’re tracking market trends or managing personal finances, this is big news. Let’s dive into the details, explore what’s changing, and discuss the broader implications.

The Big Picture: From Four Slabs to a Simpler System

India’s Goods and Services Tax (GST) has long been criticized for its complex four-tier structure (5%, 12%, 18%, and 28%). The GST Council has now streamlined it into a two-tier system: a merit rate of 5% for essentials and a standard rate of 18% for most other goods[1][2][4]. A special de-merit rate of 40% applies to select luxury and “sin” goods like high-end cars, tobacco, cigarettes, and carbonated beverages[1][4][5][3].

These reforms kick in from September 22, 2025 – coinciding with the start of Navratri – except for tobacco products, which will transition later once compensation cess obligations are cleared[1][2][5]. The move is expected to result in a revenue loss of about ₹477 billion but prioritizes affordability and economic stimulus[1]. Prime Minister Narendra Modi highlighted this as a “common man” focused reform, reducing taxes on daily essentials after rigorous reviews[1][3].

This isn’t just tax tinkering; it’s a strategic push to boost consumption amid global headwinds like US tariffs on Indian goods. For businesses, it means easier compliance, while consumers get relief on household budgets.

What Items Are Getting Cheaper? A Closer Look

The rate cuts target everyday essentials, making them more affordable. Here’s a breakdown of key categories based on the announcements:

Daily Household and Personal Care Items

Many basics have shifted to the 5% slab or even nil GST, down from higher rates:

• Hair oil, shampoo, toothpaste, toilet soap bars, toothbrushes, and shaving cream: From 18% to 5%[4][5].
• Utensils and feeding bottles/napkins for babies: From 12% to 5%[4].
• Bicycles and parts: From 18% to 5%[5].

Food and Dairy Products

Food security gets a boost with reductions on staples:

• Butter, ghee, cheese, and dairy spreads: From 12% to 5%[4][6].
• Pre-packaged namkeens, bhujia, mixtures, pasta, cornflakes, biscuits, and chocolates: From 12-18% to 5%[6].
• Ultra-high temperature (UHT) milk, chena, and paneer: Now nil (exempt)[2][6].
• Dry fruits like almonds, pistachios, and cashews: From 12% to 5%[6].
• Refined sugar, confectionery like toffees, and packaged foods (e.g., sausages, fish products): To 5%[6].

Health and Medical Essentials

Healthcare affordability is a highlight, with exemptions and cuts:

• All individual life and health insurance policies (including family floaters and senior citizen plans): Now exempt (nil GST) from 18%[4][7].
• Thermometers, glucometers, test strips, diagnostic kits, medical-grade oxygen, and corrective spectacles: From 12-18% to 5%[4].

Education and Stationery

Supporting learning:

• Maps, charts, globes, pencils, sharpeners, crayons, pastels, exercise books, notebooks, and erasers: From 5-12% to nil[4].

Agriculture and Farming Tools

Farmers benefit too:

• Tractors, tractor tires/parts, bio-pesticides, micro-nutrients, drip irrigation systems, and agricultural machinery: From 12-18% to 5%[4].

Automobiles and Transport

Big wins for mobility:

• Petrol/hybrid, LPG, CNG cars (up to 1200cc and 4000mm), diesel/hybrid cars (up to 1500cc and 4000mm), three-wheeled vehicles, motorcycles (up to 350cc), and goods transport vehicles: From 28% to 18%[4].
• Buses, trucks, and ambulances: From 28% to 18%[2].
• Uniform 18% on all auto parts[2].

Electronics and Appliances

Home comforts get lighter on the wallet:

• Air conditioners, televisions (above 32″), monitors, projectors, and dishwashing machines: From 28% to 18%[4].

These cuts cover a wide range of “common man” items, potentially saving households hundreds of rupees monthly[1][3].

What Stays Expensive or Gets a Special Rate?

Not everything is cheaper. Luxury and sin goods face a 40% rate to discourage excess:

• High-end cars (engine >1500cc), motorcycles (>350cc), helicopters, and yachts[5].
• Aerated waters, carbonated beverages, caffeinated drinks, and non-alcoholic beverages[5].
• Tobacco products like cigarettes, gutka, beedi, and pan masala remain at 28% for now, transitioning to 40% later[1][5].

Coal and lottery services also see revised rules, but sin goods like these ensure the tax system remains progressive[6].

Economic Impact: Boost for Growth or Revenue Challenge?

From an investor’s perspective on hitender.biz, these reforms could stimulate demand in sectors like consumer goods, automobiles, and healthcare. Lower taxes on essentials might increase disposable income, driving spending and supporting stock market segments like FMCG and auto stocks[8][6]. The exemption on insurance could expand coverage, benefiting insurers and related financial services – something we at Motilal Oswal are watching closely.

However, the estimated ₹477 billion revenue shortfall[1] raises questions about fiscal health. States agreed unanimously, but it might pressure government borrowing or spending. On the flip side, simplified compliance could ease doing business, attracting more investments amid US-India trade tensions.

For small businesses and sub-brokers like me, this means rethinking pricing strategies and advising clients on tax-efficient investments. If you’re in New Delhi or elsewhere, these changes align with broader economic goals, potentially aiding recovery in a tariff-hit environment.

Wrapping Up: A Step Toward Inclusive Growth

The new GST rates mark a citizen-centric shift, making essentials more accessible while maintaining checks on luxuries[1][7]. Effective September 22, 2025, this “GST 2.0” could reshape household budgets and business landscapes. Stay tuned to hitender.biz for more updates on how this ties into stock market trends and personal finance strategies.

If you have questions or need personalized advice on investments, drop a comment or reach out via hitender.biz. Let’s navigate these changes together!

Hitender Tanwar is a sub-broker with Motilal Oswal Financial Services. Views expressed are personal.

Sources
[1] New GST rates: Full list of items that have received rate cut https://www.hindustantimes.com/business/gst-rate-cut-list-of-items-cheaper-costlier-101756918308116.html
[2] Two-rate GST structure approved; new rates to kick-in from Sept 22 https://caalley.com/news-updates/indian-news/two-rate-gst-structure-approved-new-rates-to-kick-in-from-sept-22-fm
[3] India delivers a tax bonanza ‘for common man’, new GST rates from … https://www.hindustantimes.com/business/new-two-tier-gst-structure-to-kick-in-from-22-september-nirmala-sitharaman-101756917458027.html
[4] GST rate cut 2025: What gets cheaper? A look at items attracting 18 … https://upstox.com/news/business-news/tax/gst-rate-cut-2025-what-s-getting-cheaper-a-look-at-items-attracting-18-5-or-nil-gst/article-180670/
[5] GST 2.0: Check the complete list of goods under 40% sin tax https://www.indiatoday.in/business/personal-finance/story/gst-new-rules-what-items-taxed-at-40-percent-nirmala-sitharaman-announcements-cigarette-tobacco-drinks-2781600-2025-09-03
[6] GST 2.0 gets the green light; what gets cheaper and … https://economictimes.com/news/economy/policy/gst-2-0-gets-the-green-light-what-gets-cheaper-and-costlier-from-september-22/articleshow/123681657.cms
[7] Recommendations of the 56th Meeting of the GST Council held … – PIB https://www.pib.gov.in/PressReleasePage.aspx?PRID=2163555
[8] GST 2.0 unveiled: Two-slab structure cleared, new rates will come … https://indianexpress.com/article/business/gst-council-approves-two-tier-tax-implemented-september-22-10228654/