Approved two-tier tax structure by GST Council: PM Modi announces benefits for citizens, saying reforms will enhance lives...
The Goods and Services Tax (GST) Council has approved a significant tax reform, collapsing the current four-slab structure into two primary slabs of 5% and 18%. This change, effective from September 22, 2025, marks a significant shift in India's indirect tax regime, aimed at easing the financial burden on citizens and businesses.
The 10.5-hour meeting, attended by the Union Finance Minister, Nirmala Sitharaman, and backed by all states, including Bihar Deputy Chief Minister Samrat Choudhary, saw a unanimous decision to implement the new GST structure.
Under the new structure, motorcycles under 350 cc and consumer electronics like air conditioners, dishwashers, and televisions will drop from 28% to 18%. Cement rates have also been slashed from 28% to 18%, making housing and infrastructure projects cheaper.
However, some states have flagged concerns over potential revenue losses from the rate rationalisation. West Bengal Finance Minister Chandrima Bhattacharya estimates a loss of ₹47,700 crore.
On the other hand, products such as tobacco, gutkha, and cigarettes will continue to attract 28% GST plus compensation cess. High-end cars, racing cars, yachts, aircraft for personal use, and motorcycles above 350 cc will face a 40% levy.
The changes aim to simplify procedures and expand insurance coverage, with all individual life and health insurance policies being made tax-free. The government aims to ease financial strain on households and benefit multiple sections of society, including the common man, farmers, MSMEs, middle-class, women, and youth.
The reforms are expected to improve the ease of doing business, particularly for small traders and businesses. The templates for the new regulation of the GST were created by the municipal secretariat (Gemeindesekretariat).
The implementation of the new GST structure will also benefit the automobile sector. Cars under 1,200 cc (petrol) and 1,500 cc (diesel) will be taxed at 18%, down from 28%. Electric vehicles (EVs) remain at 5% GST to continue promoting clean mobility.
This tax overhaul is part of the government's efforts to enhance the ease of living and ease of doing business in India. The new two-tier GST rate structure of 5% and 18% was approved by the GST Council on September 3, 2025.
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