India's GST Council approved a two-slab regime (5% & 18%) effective Sept 22, 2025, with a 40% sin goods rate. Here's what changes and why.
GST Council Reshapes Tax Slabs: What Changed and Why It Matters
The GST Council has abolished the 12% and 28% slabs, consolidating the system into just two primary rates: 5% (merit) and 18% (standard). A separate 40% rate has been reserved for a limited set of sin and luxury goods.
The move is aimed at reducing consumer prices, simplifying compliance, and ending classification disputes that created anomalies in the earlier structure. The new rates will apply from September 22, 2025 for most goods and services.
This has been confirmed by multiple outlets including Times of India (effective date & two slabs), Indian Express (two-tier structure & implementation date), Financial Express and Live (Council approvals), LiveMint (effective date and exceptions), and Deccan Herald/PTI.
Early Examples Highlighted by Media
While official consolidated lists are still awaited via notifications, FAQs and explainers from outlets have reported early examples:
Bicycles & parts: cut to 5% (from 12%)
Small cars: now 18% (from 28%), with definitions clarified by engine capacity and length
Motorcycles: up to 350cc at 18%; above 350cc at 40%
Ambulances, buses, goods vehicles: moved to 18% (from 28%)
(Source: Hindustan Times FAQ; final scope subject to official notifications and state adoption.)
What Gets Cheaper or Costlier
Likely cheaper: Many mass-consumption items shifting from 12% to 5%, and several durables and auto categories moving from 28% to 18%.
Unaffected or higher: Select sin and luxury goods now taxed at 40%, such as certain tobacco products and premium categories.
What Businesses Should Do Now
Review SKUs & HSNs – Identify items moving from 12% to 5% and 28% to 18%; adjust pricing and invoicing.
Update ERP and e-commerce systems – Revise tax masters, POS systems, invoice templates, and displayed prices before September 22.
Revise contracts and quotes – Update clauses for supplies straddling the transition date and inform dealers.
Revisit ITC and pricing – Assess margin impacts and plan pass-through benefits to consumers.
Monitor notifications – Track upcoming CGST, IGST, and state-level notifications for final HSN coverage and transitional rules.
Official Notifications and Caveat
While the Council’s decision is clear on new slabs and the effective date, specific item coverage will be final only once official notifications are issued. Until then, lists reported by media remain indicative. Businesses should prepare their systems and pricing but validate against the formal notification text.
