Increased GST tax rates on selected items: Discover the comprehensive list of products subject to a 40% tax rate under the revised GST regulations

The GST Council has approved a reform of the Goods and Services Tax (GST) framework, aiming to simplify the existing structure and address longstanding anomalies. The new GST rates, which will come into effect from September 22, 2025, will see a reduction in taxes for common use items and an introduction of a special 40% GST slab for "super luxury" and "sin" goods.

Starting from next year, common use food and beverages such as butter, ghee, dry nuts, condensed milk, sausages and meat, sugar boiled confectionery, jam and fruit jellies, tender coconut water, namkeen, drinking water packed in 20-liter bottles, fruit pulp or fruit juice, beverages containing milk, ice cream, pastry and biscuits, corn flakes and cereals, and sugar confectionery will have their GST rates reduced to 5% from the current 18%.

This move is part of the government's efforts to boost domestic spending and cushion the economic blow of US tariffs. The finance minister also stated that items in the 18% and 12% slabs have been brought down to the 5% slab.

On the other hand, a special GST rate of 40% will be levied on pan masala, tobacco products, cigarettes, aerated drinks containing added sugar, and caffeinated beverages. Other goods that will attract a 40% GST rate include carbonated beverages of fruit drink or carbonated beverages with fruit juice, unmanufactured tobacco, tobacco refuse, cigars, cheroots, cigarillos, cigarettes, other manufactured tobacco and tobacco substitutes, products containing tobacco or reconstituted tobacco, products containing tobacco or nicotine substitutes, motor vehicles with engine capacities exceeding 1200cc or lengths exceeding 4000 mm, and motor vehicles with engine capacities exceeding 1500cc or lengths exceeding 4000 mm.

The changes in GST rates will apply to all products except sin goods, which will continue at the existing rates until the loan and interest payment obligations under the compensation cess account are completely discharged. Daily use food items will continue to attract a nil tax rate.

In addition, the new GST rates will also see a reduction in taxes for items such as hair oil, TVs, and personal health and life insurance policies. All individual life and health insurance policies will now attract a nil GST rate. Motorcycles exceeding 350 cc and aircraft for personal use will also attract a 40% GST rate, starting from September 22, 2025.

The GST Council meeting on Wednesday has marked a significant step towards a more simplified and equitable GST structure, with the number of slabs reduced from four to a two-rate structure: 5% and 18%. The changes are expected to bring clarity and predictability to the tax structure, benefiting both businesses and consumers.

Increased GST tax rates on selected items: Discover the comprehensive list of products subject to a 40% tax rate under the revised GST regulations