Major GST Overhaul Takes Effect, Slashing Rates on Hundreds of Goods

21 September, 2025

A new two-tier Goods and Services Tax (GST) structure came into effect today, resulting in price reductions for approximately 375 items, from kitchen staples to electronics. Under the reforms, most goods in the 12% slab will move to 5%, while 90% of items in the 28% slab will now be taxed at 18%. In a national address, Prime Minister Narendra Modi framed the rollout as a "GST savings festival," stating the changes will accelerate growth and increase the ease of doing business.

Unpacked:

Which items are most affected by the reduction in GST rates, and how will consumers benefit?

Items like kitchen staples, electronics, and consumer durables see the largest price drops due to rate cuts from 12% to 5% and 28% to 18%. Consumers benefit through lower retail prices, expanded demand, and improved affordability for everyday goods and appliances.

What challenges might businesses face in implementing the new GST structure?

Businesses, especially small and medium enterprises, may face confusion over new rates, technical glitches in GST filing systems, and the need to update contracts and accounting processes. These issues can increase compliance costs and require rapid adaptation to regulatory changes.

How has GST reform impacted state revenues and fiscal relations between the central and state governments?

GST reforms have led to uneven revenue growth among states, with some benefiting more than others. Delays in compensation payments from the central government have caused fiscal strain and raised concerns about state autonomy and fair revenue distribution.

Are there sectors or goods still excluded from GST, and what is the significance of these exclusions?

Petroleum products and alcohol for human consumption remain excluded from GST. Their exclusion leads to continued tax cascading, price disparities across states, and limits the goal of a unified national market, prompting calls for future inclusion.

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