Biggest GST Rate Cuts: What’s Cheaper and What’s Costlier?

On September 3rd, Finance Minister announced the biggest GST reforms, which can boost India’s GDP by 20 to 30 basis points. In this announcement, the government has scrapped 12% and 28% slabs, leaving only a two-rate system. From September 22, 2025, there will be only 5% & 18% GST rates, along with a 40% slab for sin goods and luxury items.

In this blog, we’ll get into the details of how the common man will benefit from these GST rate cuts announcements and what items can become cheaper and costlier.

Table of Content hide

1 Goods and Services Set to Become Cheaper

1.1 1. Foods and Daily Items

1.2 2. Electronics & Appliances

1.3 3. Insurance

1.4 4. Healthcare & Medicines

1.5 5. Automobiles & Transport

1.9 9. Hotel and Beauty Services

2 Goods and Services Set to Become Costlier

2.1 WHY SMC

Goods and Services Set to Become Cheaper

Here is the list of goods and services set to become cheaper from the GST rate cuts:

1. Foods and Daily Items

GST on basic food items has been reduced from 5% to zero, covering essentials like milk, paneer, and chhena. However, all Indian breads such as roti, paratha, and parotta will attract nil GST rates from the current 18%.

Packaged foods, including namkeens, bhujia, sauces, pasta, noodles, chocolates, coffee, cornflakes, butter, and ghee, will now attract just 5% GST, down from the current 12% or 18% rates.

Daily use household items like hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, and tableware will also see their GST drop to 5% from the earlier 12% or 18%.

2. Electronics & Appliances

GST on ACs, TVs, and dishwashers has been reduced from 28% to 18%, covering all sizes of TVs, air conditioners, washing machines, and dishwashing machines.

3. Insurance

Life and health insurance policies for individuals, including term plans, ULIPs, endowment, family floater, and senior citizen plans, as well as reinsurance, will now see zero GST from the current 18%.

4. Healthcare & Medicines

GST on 33 lifesaving medicines has dropped from 12% to zero, and cancer and rare disease medicines (3 drugs) are now at zero GST instead of 5%.

General medicines now attract 5% GST, down from 12% while medical devices and apparatus, such as surgical, dental, veterinary devices, and diagnostic kits, have reduced from 18% to 5%.

Medical supplies like bandages, gauze, reagents, glucometers, and other consumables also move from 12% to 5%.

5. Automobiles & Transport

Small cars and motorcycles with less than or equal to 350cc, buses, trucks, and ambulances will see GST reduced from 28% to 18%.

Auto parts, including 3-wheelers, now have a uniform rate of 18% (down from 12% / 28%).

6. Agriculture

GST on agricultural machinery, including tractors, harvesters, threshers, and compost machines, has fallen from 12% to 5%.

GST on fertilizer chemicals such as sulphuric acid, nitric acid, and ammonia also drop from 18% to 5%.

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7. Textiles

Handicrafts, marble, granite, and leather goods now attract 5% GST, down from 12%.

For the textile sector, fibre and yarn rates are corrected to 5% from 18% and 12%, resolving the inverted duty structure.

8. Cement

GST rates on all types of cement (portland, aluminous, slag, and super sulphate) have been reduced from 28% to 18%.

9. Hotel and Beauty Services

Hotel rooms priced equal to or less than ₹7,500 per day now attract 5% GST instead of 12%.

Beauty and wellness services like gyms, salons, barbers, and yoga centres will have GST cut from 18% to 5%.

Detailed summary of goods and services on which GST rate cuts have been announced.

Category	Old GST Rate	New GST Rate	Details
Basic Food Items	5% / 18%	0%	Milk, paneer, chhena, roti, paratha, parotta
Packaged Foods	12% / 18%	5%	Namkeens, bhujia, sauces, pasta, noodles, chocolates, coffee, cornflakes, butter, ghee
Daily Use Household Items	12% / 18%	5%	Hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, tableware
Electronics & Appliances	28%	18%	ACs, TVs, washing/dishwashing machines
Life Insurance	18%	0%	Term plans, ULIPs, endowment, reinsurance
Health Insurance	18%	0%	Family floater, senior citizen plans, reinsurance
Lifesaving Medicines	12%	0%	33 critical treatment drugs
Cancer & Rare Disease Medicines	5%	0%	3 drugs for severe diseases
General Medicines	12%	5%	All other drugs
Medical Devices & Apparatus	18%	5%	Surgical, dental, veterinary devices, diagnostic kits
Medical Supplies	12%	5%	Bandages, gauze, reagents, glucometers, consumables
Small Cars & Motorcycles (≤350cc)	28%	18%	Two-wheelers and compact cars
Buses, Trucks, Ambulances	28%	18%	Commercial & passenger vehicles
Auto Parts (including 3-wheelers)	12% / 28%	18%	All auto parts
Agricultural Machinery	12%	5%	Tractors, harvesters, threshers, compost machines
Fertilizer Chemicals	18%	5%	Sulphuric acid, nitric acid, ammonia
Handicrafts & Small Goods	12%	5%	Handicrafts, marble, granite, leather goods
Textiles (Fibre & Yarn)	18% / 12%	5%	Correction of inverted duty structure
Cement	28%	18%	Portland, aluminous, slag, super sulphate cement
Hotel Accommodation	12%	5%	Rooms ≤ ₹7,500 per day
Beauty & Wellness Services	18%	5%	Gyms, salons, barbers, yoga centres

Goods and Services Set to Become Costlier

Here is the list of sin and luxury goods that will now face a higher GST of 40%.

GST on sin goods like pan masala, tobacco products, and cigarettes rose from 28% to 40%.
Beverages, including aerated and caffeinated drinks, have gone up from 28% to 40%.
Luxury automobiles and motorcycles of more than 350cc now attract 40% GST.
Entertainment and gaming services, including casinos, sporting events, lotteries, and online gaming, have increased from 28% with ITC to 40% with ITC.

Also read: Sectors and Stocks to Benefit from GST Reforms

Conclusion

These announcements are expected to follow the classic economic principle. Lower taxes can lead to higher demand, thereby leading to better earnings prospects for the companies. Hence, these GST rate cuts can provide a boost across all key sectors such as FMCG, automobiles, FMCG, textiles, insurance, etc.

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Author: All Content is verified by SMC Global Securities.