GST Reform 2025: Two Slabs – 5% & 18%, Effective – Sept 22, 10 Points
Delhi
Key Highlights of GST Reform 2025
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Two-Slab GST Structure
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Old system with four slabs (5%, 12%, 18%, 28%) replaced.
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New structure: 5% (essentials) and 18% (aspirational items).
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Effective from September 22, 2025.
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Economic Impact
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Expected revenue implication of ₹48,000 crore.
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Designed to put more disposable income in people’s hands.
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Boosts consumption-driven growth and supports ease of doing business.
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Biggest Beneficiaries – Common Man & Farmers
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Food, medicines, farm goods, small cars, green energy → Cheaper.
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33 life-saving drugs (including anti-cancer medicines) → Exempted from GST.
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Medical essentials (thermometers, glucometers) → 5% GST.
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Agricultural implements tax reduced from 12% to 5%.
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Affordable Healthcare & Education
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Health insurance policies (including family floater) → No GST.
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Education supplies (exercise books, pencils, crayons) → 5% GST, down from 12%.
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Aspirational Goods Made Cheaper
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TVs, ACs, bikes under 350cc → Now 18% GST (earlier 28%).
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Small cars (petrol ≤1200cc, diesel ≤1500cc) → 18% slab.
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Luxury & Sin Goods Heavily Taxed
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Tobacco products, carbonated drinks, large cars, premium bikes → 40% Sin Tax.
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Luxury items → Remain at 28% GST or higher.
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Daily Essentials Protected
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Bread, milk, paneer → Zero GST.
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Hair oil, shampoo, soap, dairy products, snacks, sauces → 5% GST.
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Rationale Behind Reform
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18% slab alone generated 67% of GST revenue in last 8 years.
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12% slab contributed just 5%, making it redundant.
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28% slab often discouraged consumption, now rationalized.
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Government’s Vision
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PM Narendra Modi called it “Next-Generation GST Reform”.
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Focus: Ease of living, support for MSMEs, middle class, women, youth, and farmers.
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Expected Outcome
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Simplified tax compliance for traders and businesses.
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Lower prices on essentials & aspirational goods.
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Higher purchasing power, fueling India’s consumption economy.
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Here are tables capturing the key annexures completely:
Annexure-I: GST Rate Changes — Goods (HSN-wise)
| S. No. | HSN Code(s) / Tariff Item | Description / Sector | From Rate | To Rate |
|---|---|---|---|---|
| 1 | 01012100, 010129 | Live horses | 12% | 5% |
| 2 | 0401 | Ultra-High Temperature (UHT) milk | 5% | Nil |
| 3 | 0402 91 10, 0402 99 20 | Condensed milk | 12% | 5% |
| 4 | 0405 | Butter, ghee, dairy spreads | 12% | 5% |
| 5 | 0406 | Cheese | 12% | 5% |
| 6 | 0406 | Chena (paneer), pre-packaged & labelled | 5% | Nil |
| … | … | …(continues across food, agricultural, industrial sectors) | … | … |
Note: The full Annexure-I spans a broad range of categories such as food, dairy, nuts, machinery, auto parts, pharmaceuticals, textiles, renewable energy devices, etc. Press Information Bureau
Annexure-III: GST Rate Changes — Services (HSN-wise)
| S. No. | HSN Code | Description | From Rate | To Rate |
|---|---|---|---|---|
| 1 | 9954 | Earth works contract services (composite supply) to government | 12% with ITC | 18% with ITC |
| 2 | 9954 | Sub-contract works contract supply to main contractor | 12% with ITC | 18% with ITC |
| 3 | 9955 | Passenger transport (fuel cost included) | 5% with ITC | 5% with ITC |
| 4 | 9965 | Goods transport by GTA | 12% with ITC | 18% with ITC |
| 5 | 9965 | Container rail transport (non-Indian Railways) | 12% with ITC | 5% without ITC |
| 6 | 9965 | Pipeline transport of fuel, gas, ATF, etc. | 5% without ITC | 5% without ITC |
| 7 | 9965 | Multimodal goods transport within India | 12% with ITC | 5% with restricted ITC |
| 8 | 9966 | Passenger vehicle renting (with operator, fuel included) | 12% with ITC | 18% with ITC |
| 9 | 9966 | Goods carriage renting (with operator, fuel included) | 18% with ITC | 5% with ITC |
| 10 | 9968 | Local delivery services (standard) | 18% with ITC | 18% with ITC |
| 11 | 9971 | Third-party insurance for goods carriage | 12% with ITC | 5% with ITC |
| 12 | 9973 | Goods rental without operator | 28% with ITC | 40% with ITC |
| 13 | 9983 | Pro services in oil/gas exploration/mining | 12% with ITC | 18% with ITC |
| 14 | 9986 | Support services for oil/gas exploration | 12% with ITC | 18% with ITC |
| 15 | 9988 | Job work services (umbrellas, printing, bricks, pharma, leather) | 12% with ITC | 5% with ITC |
| 16 | 9994 | Actionable claims (betting, casinos, online gaming, etc.) | 28% with ITC | 40% with ITC |
Services Proposed to be Exempted:
| S. No. | HSN Code | Description | From Rate | To Rate |
|---|---|---|---|---|
| 1 | 9971 | Individual health insurance (incl. reinsurance) | 18% with ITC | Exempt |
| 2 | 9971 | Individual life insurance (incl. reinsurance) | 18% with ITC | Exempt |
Annexure-IV: GST Rate Changes — Services (Sector-wise Summary)
Transportation Sector
| Entry | Description | From Rate | To Rate |
|---|---|---|---|
| 1 | Air transport (non-economy class passengers) | 12% with ITC | 18% with ITC |
| 2 | Motor vehicle passenger transport (fuel included) | 5% with ITC | 18% with ITC |
| 3 | Container rail transport (non-Indian Railways) | — | 5% without ITC |
| 4 | Pipeline transport of fuels, gas, ATF, etc. | 5% without ITC | 18% with ITC |
| 5 | GTA goods transport | 5% without ITC | 18% with ITC |
| 6 | Passenger vehicle renting (fuel included) | 5% with ITC | 18% with ITC |
| 7 | Goods carriage renting (fuel included) | 12% with ITC | 5% with ITC |
| 8 | Multimodal goods transport within India | 12% with ITC | 5% with restricted ITC |
Job Work Sector
| Entry | Description | From Rate | To Rate |
|---|---|---|---|
| 1 | Umbrella-related job work | 12% with ITC | 5% with ITC |
| 2 | Printing for goods under Chapters 48 or 49 | 12% with ITC | 5% with ITC |
| 3 | Job work related to bricks | 12% with ITC | 5% with ITC |
| 4 | Pharma-related job work (Chapter 30) | 12% with ITC | 5% with ITC |
| 5 | Leather-related job work (Chapter 41) | 12% with ITC | 5% with ITC |
| 6 | Other residual job work services | 12% with ITC | 18% with ITC |
Construction Sector
| Entry | Description | From Rate | To Rate |
|---|---|---|---|
| 1 | Offshore oil & gas works contract (with services) | 12% with ITC | 18% with ITC |
| 2 | Earth work contracts (>75% value) to government | 12% with ITC | 18% with ITC |
| 3 | Sub-contractor supply of works contract services | 12% with ITC | 18% with ITC |
Local Delivery Services
| Entry | Description | From Rate | To Rate |
|---|---|---|---|
| 1 | Standard local delivery | 18% with ITC | 18% with ITC |
| Local delivery via E-commerce Operator (ECO) | N/A | 18% (newly notified) |
Other Services
| Entry | Description | From Rate | To Rate |
|---|---|---|---|
| 1 | Third-party insurance of goods carriage | 12% with ITC | 5% with ITC |
| 2 | Cinema (admission ≤ ₹100) | 12% with ITC | 5% with ITC |
| 3 | Effluent treatment by common facilities (clinical establishments) | 12% with ITC | 5% with ITC |
| 4 | Biomedical waste treatment services | 12% with ITC | 5% with ITC |
| 5 | Hotel accommodation ≤ ₹7,500/unit/day (without ITC) | 12% with ITC | 5% without ITC |
| 6 | Pro/mining technical/business services | 12% with ITC | 18% with ITC |
| 7 | Beauty & wellness services (99972) | 18% with ITC | 5% without ITC |
| 8 | Casinos, gambling, betting, etc. (de-merit services) | 28% with ITC | 40% with ITC |
Services Proposed to be Exempted
| Entry | Description | From Rate | To Rate |
|---|---|---|---|
| 1 | Individual health insurance | 18% with ITC | Exempt |
| 2 | Individual life insurance | 18% with ITC | Exempt |
Annexure-V: Measures for Facilitation of Trade
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Risk-Based Provisional Refund (Zero-Rated Supplies)
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Amend Rule 91(2) to allow 90% provisional refunds for zero-rated supplies (exports/SEZ supplies), based on system-generated risk assessment.
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Operational from 1 November 2025. Press Information BureauA2ztaccorp
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Provisional Refund for Inverted Duty Structure (IDS)
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Amend CGST Act Section 54(6) for 90% provisional refunds on IDS claims, similar to zero-rated supplies.
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Operational from 1 November 2025 (through administrative CBIC instructions). Press Information BureauA2ztaccorp
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GST Refunds for Low-Value Export Consignments
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Eliminate threshold limit under Section 54(14) to help small exporters (courier/postal mode). Press Information Bureau
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Simplified GST Registration for Low-Risk Businesses
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Optional scheme: Automated approval within 3 working days for applicants whose output tax ≤ ₹2.5 lakh/month.
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Benefits ~96% of new applicants. Operational from 1 November 2025. Press Information Bureau
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Simplified Registration for Suppliers via E-Commerce
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Introduced in principle; detailed modalities forthcoming. Helps small suppliers active across multiple states. Press Information Bureau
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Place of Supply Changes for Intermediary Services
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Remove clause (b) from Section 13(8) of IGST Act: location determined by recipient address—helps exporters claim benefits. Press Information Bureau
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Post-Sale Discount Reforms
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Remove Section 15(3)(b)(i) requirement and allow discounts through credit notes under Section 34.
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Revoke previous circular, and clarify post-sale discount handling and ITC reversal. Press Information Bureau
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Retail Sale Price Valuation for Tobacco Products
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Apply RSP-based GST valuation for pan masala, cigarettes, gutkha, unmanufactured tobacco, etc. Amend CGST Rules accordingly. Press Information Bureau
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