Big Relief for the Middle Class: What’s Cheaper and What’s More Expensive from Tomorrow?
The Goods and Services Tax (GST) reform, set to take effect tomorrow, September 22, 2025, promises significant changes to India’s taxation system. Approved by the GST Council under the leadership of Union Finance Minister Nirmala Sitharaman, the new GST structure aims to simplify tax rates, encourage consumption, and provide relief to the common man, especially the middle class. Here’s a breakdown of what’s changing, what will become cheaper, and what will be more expensive.
Key Changes in the GST Structure
Simplification of GST Slabs
The most significant change is the simplification of GST rates. The new system introduces:
- Two Main GST Slabs:
- 5% GST
- 18% GST
- Special Slab for Sin Goods:
- Items like tobacco, alcohol, and aerated drinks will attract a 40% GST, a new “sin tax” category to deter consumption.
What’s Going to Be Cheaper?
Several essential goods and services are set to become more affordable for the common man starting tomorrow. Here’s a look at the key items that will see a reduction in GST:
1. Everyday Essentials
Household products that were previously taxed at a 12% GST rate are now likely to fall into the 5% slab. These items include:
- Toothpaste, Soap, and Shampoo
- Packaged Foods (such as biscuits, snacks, and juices)
- Dairy Products (including ghee and condensed milk)
- Bicycles and Stationery
- Clothing and Shoes (up to a certain price limit)
2. Home Appliances and Electronics
Items currently taxed at 28% GST will see a reduction to 18%, making essential household appliances more affordable. Expected price drops include:
- Air Conditioners
- Refrigerators and Dishwashers
- Large Screen Televisions
- Cement (important for the construction and housing sectors)
3. Automobiles
The automobile sector will also benefit from reduced taxes:
- Small Cars (engines less than 1,200cc) will see a GST reduction from 28% to 18%.
- Two-Wheelers, a staple for mobility in India, may fall under the lower 18% slab.
- Luxury Cars and SUVs will remain heavily taxed, with high GST rates continuing.
4. Insurance and Financial Services
Insurance premiums, currently taxed at 18%, may be brought under a lower slab or potentially exempted altogether. This reduction will likely make insurance more affordable for middle-class families, enhancing financial security and reducing health/life risks.
What’s Going to Be More Expensive?
While many goods and services will become cheaper, there are certain items that will continue to be taxed at higher rates, or even more expensive than before:
1. Sin Goods
Products in the so-called “sin goods” category will be taxed at a hefty 40% under GST 2.0. These include:
- Tobacco Products
- Alcohol
- Pan Masala
2. Online Betting and Gaming Platforms
Gambling and online betting will continue to be taxed heavily under the new regime, which may increase the cost for users engaging in these activities.
3. Petroleum Products
Petroleum products, including petrol and diesel, remain outside the scope of the GST system. Hence, there will be no relief in fuel prices, which will continue to be subject to excise duties and state taxes.
4. Luxury Goods
Items such as diamonds and precious stones will still be subject to high taxes, ensuring that luxury goods remain expensive for the affluent class.
Conclusion
The GST 2.0 reform is a significant step towards streamlining India’s indirect tax system. By reducing the tax burden on everyday essentials, home appliances, and automobiles, the government aims to provide relief to the middle class, boosting consumption and economic growth. However, luxury goods, sin products, and fuel prices will continue to carry hefty taxes, reflecting the government’s intent to target high-income spending while promoting welfare for the masses.
