PM’s New GST Move: What It Means for Everyday Retail Customers

The gold GST rate changes are just one part of a massive tax overhaul that effectively makes 375 items cheaper starting today, September 22, 2025. We’re witnessing what Prime Minister Modi has aptly called the “GST Savings Festival,” where everyday products from kitchen staples to automobiles are now more affordable for consumers across India.

The GST reforms 2025 represent a significant shift in our taxation system, simplifying the previous multi-slab structure into primarily two rates: 5% and 18%, with a 40% rate reserved for ultra-luxury and sin goods. As a result of these gst updates 2025, the government expects to inject an estimated ₹2 lakh crore into the Indian economy. Specifically, when combined with the income tax relief announced in the Union Budget, these changes will help citizens save over ₹2.5 lakh crore annually.

This comprehensive gst relief covers numerous categories that affect our daily lives. Major FMCG companies like Hindustan Unilever (makers of Dove, Lux, and Lifebuoy) are slashing prices, while Amul has already reduced costs for over 700 products. In addition, the auto sector has emerged as a major beneficiary, with effective tax rates including cess dropping from 35-50% to a flat 40%. From dairy products to electronics, health insurance to beauty services – the next generation of GST reforms is designed to make essential goods and services more accessible to all of us.

Government slashes GST rates under GST 2.0

The 56th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, has ushered in the most significant overhaul of India’s taxation system since its inception. The implementation of GST 2.0 on September 22, 2025, marks a decisive shift in how India taxes goods and services nationwide.

What is GST 2.0 and how is it different?

GST 2.0 represents a fundamental restructuring of the existing tax framework. Unlike the previous system with four tax slabs (5%, 12%, 18%, and 28%), the new structure primarily features just two rates. Furthermore, this simplified approach aims to create a more transparent and business-friendly environment by reducing classification disputes that previously plagued the system. Notably, this overhaul comes after eight years of the original GST’s implementation, which first united multiple central and state taxes on July 1, 2017.

Why the government introduced GST reforms 2025

Prime Minister Narendra Modi initially announced these reforms during his Independence Day address, describing them as “Next-Generation GST reforms” that would reduce the tax burden on common citizens. According to official statements, the GST relief package primarily targets five key groups: the common man, farmers, MSMEs, women, and middle-class families. In essence, these changes address longstanding issues including complex compliance requirements, inverted duty structures, delayed refunds, and classification confusion.

New tax slabs: 5%, 18%, and 40% explained

The streamlined structure introduces a “merit rate” of 5% for essential items and goods of common consumption. In contrast, the “standard rate” of 18% covers most other products and services in the economy. A special 40% “demerit rate” applies exclusively to ultra-luxury and “sin” goods such as pan masala, tobacco, aerated drinks, high-end cars, yachts, and private aircraft. At this point, it’s worth noting that gold and silver continue to attract a special 3% GST rate, remaining unchanged from the previous framework. Through this rationalization, the government aims to balance revenue needs with social welfare objectives.

FMCG and daily essentials become more affordable

Following the GST reform implementation, fast-moving consumer goods (FMCG) and essential daily items have become substantially cheaper across India. The GST Council’s decision to rationalize rates has brought immediate relief to consumers through reduced prices on hundreds of everyday products.

Toothpaste, soaps, and shampoos now taxed at 5%

Personal care products have received significant tax relief under the GST reforms 2025. Products that were formerly taxed at 18% – including hair oil, shampoos, toothbrushes, toothpaste, face powder, talcum powder, and toilet soap bars – now fall under the 5% tax bracket. Consequently, major price reductions are visible across these categories. For instance, a 340-ml bottle of Dove shampoo previously priced at ₹490 now costs ₹435. Similarly, a pack of four Lifebuoy soaps (75g each) has dropped from ₹68 to ₹60.

Amul, HUL, and other brands announce price cuts

Leading brands have promptly passed GST benefits to consumers. The Gujarat Cooperative Milk Marketing Federation (Amul) has slashed prices across more than 700 product categories. Their 100g butter pack has decreased from ₹62 to ₹58, while 1-liter ghee is now ₹610 instead of ₹650. Likewise, Hindustan Unilever Limited (HUL) has introduced “Retailer Bonanza” offering additional discounts – 4% on soaps and 10-20% on shampoos. Other corporations including Procter & Gamble, Emami, L’Oréal and Himalaya have also announced immediate price reductions.

Packaged food and dairy products see major relief

Dairy products have received substantial gst relief with UHT milk and paneer now completely tax-free (0% GST). Butter, ghee, cheese and milk-based beverages now attract only 5% GST, down from the previous 12%. Mother Dairy has reduced prices across its entire portfolio, which now falls either under the exempted/nil or 5% tax slab. Additionally, packaged foods like pasta, biscuits, chocolates, cornflakes and namkeens have moved to the 5% bracket.

Rail Neer and bottled water prices revised

Indian Railways has officially reduced the maximum retail price of its packaged drinking water brand Rail Neer. Henceforth, a 1-liter bottle costs ₹14 instead of ₹15, while a 500ml bottle is priced at ₹9, down from ₹10. This price reduction took effect from September 22, 2025. Moreover, the Railway Board has mandated that all other bottled water brands sold at railway premises must also follow these revised rates. Essentially, this ensures that all railway passengers benefit directly from the GST rate cuts.

Automobiles and electronics see significant price drops

The GST 2.0 reforms have made significant impact on the automobile and electronics sectors, with major tax reductions resulting in substantial price cuts across various categories.

Cars and bikes under 1500cc now taxed at 18%

The GST Council has reduced taxes on small cars from 28% to 18%. This includes petrol and petrol-hybrid vehicles up to 1200cc and diesel vehicles up to 1500cc, both under 4000mm length. Additionally, motorcycles and scooters with engines up to 350cc have moved to the 18% bracket, benefiting approximately 98% of India’s two-wheeler market.

Maruti, Tata, Hyundai slash prices up to ₹2.5 lakh

Subsequently, major automakers have announced significant price reductions. Maruti Suzuki has cut prices by up to ₹2.25 lakh on models like Invicto, while Tata Motors has reduced prices by up to ₹1.55 lakh on vehicles including Nexon. Hyundai has announced reductions up to ₹2.4 lakh, with popular models like Venue seeing cuts of ₹1.23 lakh.

TVs, ACs, and washing machines move to 18% slab

Coupled with automobile price cuts, consumer electronics have become more affordable. Items previously taxed at 28% – including air conditioners, refrigerators, washing machines, dishwashers, and televisions above 32 inches – now attract only 18% GST. This translates to price reductions of approximately 8-9% for consumers.

Mobile phones remain at 18% despite industry push

Nevertheless, mobile phones continue to attract 18% GST. The India Cellular and Electronics Association had advocated for including smartphones in the 5% bracket, arguing they should be classified as necessities. However, the government maintained the existing rate, ensuring no price changes for this category.

Healthcare, housing, and services get GST relief

GST reforms 2025 have brought major relief to healthcare, housing, and service sectors, giving citizens significant savings on essential wellness and living expenses.

Life and health insurance premiums now tax-free

The GST Council has completely exempted all individual life and health insurance premiums from taxation, removing the previous 18% GST burden. This exemption covers term life, ULIPs, endowment plans, family floater policies, and senior citizen health insurance. Besides financial protection, this move aims to increase insurance penetration nationwide, particularly among middle-class households.

Medicines and diagnostic kits taxed at 5%

Essential medicines have seen tax reduction from 12% to 5% or nil. Above all, over 30 life-saving drugs and diagnostic kits now attract zero GST. Furthermore, medical products including thermometers, glucometers, anesthetics, medical-grade oxygen, bandages, and surgical gloves have moved to the 5% bracket, making healthcare more affordable for patients with chronic conditions like diabetes and cancer.

Cement and construction materials become cheaper

The housing sector benefits as cement GST drops from 28% to 18%, potentially reducing construction costs by 3-5%. Concurrently, marble/granite blocks and sand-lime bricks now attract only 5% GST, down from 12%. This will boost affordable housing projects, particularly under the Pradhan Mantri Awas Yojana.

Beauty and wellness services now under 5% GST

Salon visits, spa treatments, gym memberships and yoga classes now attract 5% GST instead of 18%. Indeed, this change is mandatory from September 22, without the previous option of charging 18% with input tax credit. Everyday personal care products like hair oil, shampoo, and toothpaste have altogether moved to the 5% bracket, making self-care more accessible.

Conclusion

The GST 2.0 reforms undoubtedly represent a watershed moment in India’s taxation history. Through simplification of the tax structure, the government has effectively made hundreds of everyday products more affordable for millions of citizens. Above all, these changes benefit five key groups: common citizens, farmers, MSMEs, women, and middle-class families.

Consequently, we can expect significant economic benefits from these reforms. The estimated ₹2 lakh crore injection into the economy, coupled with ₹2.5 lakh crore annual savings for citizens, will likely boost consumer spending and overall economic growth. Furthermore, the streamlined two-slab structure addresses longstanding issues that previously complicated our taxation system.

Throughout different sectors, the impact is clearly visible. Personal care products, packaged foods, and dairy items have become substantially cheaper. Similarly, automobiles under specific engine capacities now cost up to ₹2.5 lakh less, making vehicle ownership more accessible. Additionally, the healthcare sector has received substantial relief with insurance premiums becoming tax-free and essential medicines moving to lower tax brackets.

Perhaps most importantly, these reforms directly impact our daily lives. From the toothpaste we use each morning to the healthcare services we depend on, the GST Savings Festival touches virtually every aspect of household expenses. Therefore, as consumers, we should remain aware of these changes to ensure we receive the full benefits of reduced prices from retailers and service providers.

The next generation of GST reforms thus marks a significant step toward a more equitable and simplified tax regime. While certain sectors like mobile phones haven’t seen changes despite industry advocacy, the overall direction clearly favors making essential goods and services more affordable for all Indians. After all, these comprehensive reforms aim to create a more transparent, business-friendly environment while easing the financial burden on everyday citizens.