new GST and tax system
Here’s the latest on the Government of India’s new GST and tax system (as of early September 2025):
GST Overhaul: “GST 2.0”
Slabs Simplified
- India’s GST structure has been revamped, reducing the number of tax slabs from four (5%, 12%, 18%, 28%) to a streamlined system with just two core rates—5% and 18%, plus a new 40% slab for luxury and sin goods.(Reuters, India Briefing, mint, The Economic Times, The Times of India)
Effective Date
- These new rates will take effect starting September 22, 2025, aligning with the Navratri festival.(Reuters, Business Today, The Economic Times, India Today)
What’s Cheaper
- Essential consumer goods—including toiletries like toothpaste and shampoo—are moving to 5% from higher slabs.(Reuters, The Economic Times, India Briefing, Drishti IAS, https://dwello.in, India Today)
- Items like small cars, TVs, air conditioners, cement, auto parts, renewable energy equipment, sports goods, and handicrafts are dropping to 18% and 5%, depending on category.(Reuters, The Economic Times, India Today, Drishti IAS, Goodreturns)
- Lifesaving drugs, medical devices, UHT milk, breads (like roti, paratha), paneer, and medicines are now zero-rated or under 5%. Medical devices may also attract lower GST.(India Today, Drishti IAS, Reuters, India Briefing, Goodreturns)
- All life and health insurance policies are now exempt from GST.(Reuters, https://dwello.in, Drishti IAS)
What’s Costlier
- “Sin and luxury” items—like cigarettes, pan masala, premium liquor, high-end cars, aerated beverages—are now taxed at 40%, up from the previous 28% (plus cess).(Reuters, The Economic Times, India Briefing, Drishti IAS)
Rationale and Effects
- The reform is designed to simplify the GST system, boost consumer demand, increase compliance, and ease household expenses.(Reuters, ETGovernment.com, https://dwello.in, The Times of India)
- Finance Minister Nirmala Sitharaman assured the expected revenue shortfall (~₹48,000 crore) won’t hurt public finances, citing projected economic growth via consumption gains.(The Times of India)
- There are widespread price cuts as businesses like Mercedes-Benz and Hyundai have already passed on tax savings to consumers.(The Times of India, The Economic Times)
- Several leaders—including Piyush Goyal, Shivraj Singh Chouhan, and Haryana CM Nayab Singh Saini—have praised the reforms for benefiting consumers, farmers, and the rural economy.(The Times of India)
Direct Tax (Income Tax) Updates — Union Budget 2025–26
Revised Income Tax Slabs
- The new tax regime offers 100% tax rebate up to an annual income of ₹12 lakh, meaning no income tax for individuals earning up to that threshold.(India Briefing, Reddit)
- Here’s the detailed slab structure:
- ₹0 – ₹4 lakh → Nil
- ₹4 – ₹8 lakh → 5%
- ₹8 – ₹12 lakh → 10%
- ₹12 – ₹16 lakh → 15%
- ₹16 – ₹20 lakh → 20%
- ₹20 – ₹24 lakh → 25%
- Above ₹24 lakh → 30%(India Briefing)
Additional Tax Relief Measures
- TDS thresholds increased—for example, senior citizens now have a ₹1 lakh threshold for interest income, compared to ₹50,000 earlier. Mutual fund dividend TDS threshold raised to ₹10,000.(India Briefing)
Procedural and GST Compliance Reforms
- The GST composition scheme threshold has been increased from ₹75 lakh to ₹1.5 crore (excluding select states). Filing processes and registration timelines have also been simplified.(Business Today)
Summary Table
| Reform Type | Key Changes |
|---|---|
| GST (Indirect Tax) | – 5%, 18%, and new 40% slabs from Sept 22, 2025 – Essential items cheaper; sin/luxury costlier |
| Income Tax | – No tax up to ₹12 lakh – New tiered structure up to 30% for higher incomes |
| Compliance & Relief | – Higher thresholds for small businesses, easier GST filing, faster processing |
Why This Matters
- For consumers, the shift means cheaper essentials like personal care products, food staples, and some fuel-efficient cars.
- For farmers and rural communities, lower GST on agricultural equipment and inputs helps cut costs and raise productivity.(The Times of India, India Today)
- Businesses and industries benefit from a simplified GST system with fewer slabs, making compliances more straightforward and transparent.
- Higher-rate items like luxury goods and sin products see increased taxes—both a fiscal strategy and a behavioral signal.
Would you like details on how these apply to specific sectors—like electronics, insurance, or agriculture? Or are you curious about filing changes and procedural impacts? Happy to dig deeper!