Major GST Reform
GST Council Brings Two Tier Tax Regime from September 22: The GST Council has approved a historic reform, reducing India’s four slab system to just two rates — 5% and 18%. The move, effective September 22, 2025, is described as a direct relief to the middle class and small industries. It fulfills a promise of easing household expenses and boosting overall consumption.
Static GK fact: GST was first introduced in India on July 1, 2017, replacing multiple indirect taxes.
Simplified Tax Structure
The 12% and 28% slabs have been abolished. Most goods and services now fall under either 5% or 18%. A special 40% slab has been created for tobacco products, sugary drinks, and super luxury goods like yachts and premium motorcycles.
Static GK fact: The GST Council is chaired by the Union Finance Minister and includes finance ministers of all states.
Economic and Social Impact
According to Finance Minister Nirmala Sitharaman, the reform will directly benefit the common man by reducing the cost of daily essentials. Goods under the lower tax bracket include food items, healthcare, education, and renewable energy equipment. Cheaper consumer durables such as refrigerators, TVs, and washing machines are expected to revive demand in the retail sector.
Higher rates on luxury and sin goods are designed to safeguard fiscal revenues while discouraging excessive or harmful consumption.
Goods That Become Cheaper
Items moved to the 5% slab include:
- Food staples such as butter, ghee, paneer, biscuits, chocolates, dry fruits, and edible oils.
- Healthcare products like medicines and medical devices.
- Education items such as books, pencils, and bicycles.
- Everyday essentials like soaps, shampoos, toothpaste, and footwear.
- Consumer durables like air conditioners and washing machines now taxed at 18% instead of 28%.
- Renewable energy equipment, fertilisers, toys, handicrafts shifted to 5%.
Static GK fact: The highest GST revenue-contributing state in India is Maharashtra.
Items That Remain Costlier
Certain goods remain outside the relief bracket:
- Pan masala, gutkha, cigarettes, and bidis will continue with high GST plus cess.
- Sugary and flavoured drinks now attract 40% tax.
- Luxury goods such as premium liquor, high-end cars, and imported sedans remain expensive.
- Coal moves from 5% to 18%, raising industrial input costs.
Implications for Economy
Lower household expenditure will likely increase middle class consumption. Cheaper inputs such as fertilisers and textiles will support farmers and small businesses. Economists expect this simplified system to boost GDP growth by spurring retail demand and easing tax compliance.
Static GK tip: GST is often called a “destination-based tax” because it is levied at the place of consumption, not production.
Static Usthadian Current Affairs Table
GST Council Brings Two Tier Tax Regime from September 22:
| Topic | Detail |
| Reform | GST slabs reduced from four to two (5% and 18%) |
| Abolished Slabs | 12% and 28% removed |
| Effective Date | September 22, 2025 |
| New High Slab | 40% on sin and luxury goods |
| Finance Minister | Nirmala Sitharaman |
| Cheaper Goods | Food staples, medicines, books, textiles, durables |
| Costlier Goods | Tobacco, sugary drinks, luxury cars, coal |
| Middle Class Impact | Lower household budget and higher consumption |
| Economic Effect | Boost to retail demand and manufacturing |
| GST Introduction | July 1, 2017 |
