The Goods and Services Tax (GST) Council has recently implemented a significant overhaul of the indirect tax regime, bringing substantial relief to the common man. Effective September 22, 2025, the new GST rates aim to ease household budgets by reducing taxes on a wide array of essential goods and services. This move is expected to leave more disposable income in the hands of the middle class, boost consumer spending, and potentially lower inflation.

Impact on Daily Expenses

The GST Council has compressed the existing four tax slabs into two primary rates: 5% and 18%. A special rate of 40% will be applicable to sin and ultra-luxury goods. This simplification and reduction in rates will directly impact the prices of many everyday items.

• Food and Groceries: Several food items will see reduced or nil GST rates. Ultra-high temperature (UHT) milk, paneer, and all packaged Indian breads are now exempt from GST. Packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, butter, ghee, and cornflakes will attract a lower 5% tax.
• Personal Care: Essential personal care items like hair oil, toothpaste, shampoo, combs, and toilet soap bars will see a significant reduction from 18%/12% to 5%.
• Household Items: Items such as tableware, kitchenware, bicycles, and furniture made of bamboo will also benefit from a reduced 5% GST rate, down from the previous 12%.
• Healthcare: Individual health and life insurance premiums are now GST-free, making them more affordable. Additionally, the GST on 33 life-saving drugs and medicines has been reduced to zero, and most other medicines and diagnostic kits will be taxed at only 5%.

Potential Savings for the Common Man

With these widespread GST cuts, the average household can expect to save a significant amount on their monthly expenses. While the exact savings will vary depending on individual consumption patterns, it is estimated that a typical family could save around ₹1,165 per month.

Boost to Consumer Durables and Other Sectors

The GST rate reductions extend beyond daily essentials, encompassing consumer durables and other sectors.

• Consumer Durables: Air conditioners, televisions (up to 32 inches), refrigerators, and washing machines will now be taxed at 18% instead of 28%. This is expected to make these items more affordable, potentially boosting demand during the festive season.
• Automobiles: Small cars (below 1200cc) and motorcycles (below 350cc) will also attract a lower GST of 18%, down from 28%.
• Services: Everyday services such as haircuts, gym memberships, and yoga classes will now be taxed at just 5% instead of 18%. Hotel stays under ₹7,500 a night will also become more affordable.
• Real Estate: Reduced GST on construction materials like cement and bricks can lower procurement costs across the supply chain and potentially boost the affordable housing segment.

Overall Economic Impact

The GST reforms are expected to have a wide-ranging positive impact on the Indian economy. By reducing the tax burden on essential goods and services, the government aims to increase disposable income, stimulate consumer spending, and boost demand across various sectors. The simplified tax structure is also expected to improve compliance, reduce classification disputes, and address anomalies in the inverted duty structure.

The government expects businesses to pass on the benefits of lower GST rates to consumers. The Central Board of Indirect Taxes and Customs (CBIC) will engage with industry to ensure compliance.