Several processed food items like sugar, jam, honey, chocolate, confectionery have been moved from 12% to 5% slab.

Items like paratha, parotta, and other Indian breads, earlier taxed at 18%, will not attract any tax.

The GST Council has scrapped GST on ultra-high temperature milk and pre-packaged paneer.

Motorcycles above 350cc, including mid-size and premium models, will now fall under the new 40% slab. Industry players like Royal Enfield have cautioned this could hurt India’s global edge in the mid-size segment.

Two-wheelers with engine capacity up to 350cc will now attract 18% GST (down from 28%). This category covers the majority of commuter bikes and scooters, making them more affordable for the mass market.

The GST on unmanned aircraft with cameras has been cut from 28%/18% to 5% to encourage adoption and domestic manufacturing in the defence and commercial sectors.

Automobile tyres, which earlier attracted 28% GST, will now fall under the 18% category, lowering replacement and maintenance costs.

Several auto components will now attract lower GST:

Engines, engine parts, fuel pumps, conventional batteries, ignition equipment - reduced from 28% to 18%.

High-end vehicles, including SUVs and luxury cars, have been moved from the earlier 28% slab to a newly created 40% category.

The GST Council has approved reducing GST on entry-level cars and two-wheelers from 28% to 18%. The move is expected to boost sales in the mass segment and provide relief to first-time buyers.

The GST Council approved lowering the rate on several household essentials:

Ghee, nuts, edible oils, sugar, jam, honey, chocolate, confectionery, processed food, packaged drinking water (20L), non-aerated drinks, namkeen → GST cut from 12% to 5%:

UHT milk, packaged paneer, pizza bread, plain khakhra/roti → GST cut from 5% to Nil

Paratha/parotta/other Indian breads → GST cut from 18% to Nil

Condensed milk, butter/ghee, cheese, nuts (almonds, pistachios, etc.), dates, figs, mangoes (dried), citrus fruits, starches, animal fats, fish/marine oils, lanolin → GST cut from 12% to 5%

The GST Council on Wednesday approved the long-awaited two-tier rate structure of 5% and 18%, which will come into effect from September 22.

Finance Minister Nirmala Sitharaman’s office posted on X: “Hon’ble Prime Minister Shri @narendramodi announced the Next-Generation GST Reforms in his Independence Day address. Working on the same principle, the GST Council has approved significant reforms today… aimed at ensuring ease of living for all citizens and ease of doing business for all.”

Discussions on insurance are currently underway at the GST Council meeting.

• Health and term insurance premiums may become cheaper if rate cuts are approved.
• At present, insurance premiums attract 18% GST.
• States have reportedly backed the proposal to exempt life and health insurance from GST altogether.
• Formal rate notifications are expected by the third week of September.

The Indian Auto LPG Coalition (IAC) has written to Finance Minister Nirmala Sitharaman ahead of the GST Council meeting, seeking parity in GST rates for industrial LPG, commercial LPG, auto LPG, and retrofitment kits. Domestic LPG is currently taxed at 5%, but commercial and auto LPG attract 18% GST, while kits face up to 28% GST. IAC argues that the discrepancy burdens MSMEs and food service businesses, and discourages adoption of cleaner fuels. The body has demanded a uniform 5% GST across all LPG categories, saying it would cut illegal diversion, boost clean fuel adoption, and support India’s net-zero goals.

GST changes come at a crucial time for e-commerce platforms. Festive sales account for nearly a quarter of annual revenues, and pricing strategies are being recalibrated to reflect the likely tax structure. Industry leaders believe India’s deep-rooted festive shopping culture will offset any temporary lull.

Analysts say many online shoppers are postponing high-value purchases such as electronics and home appliances in the expectation of lower prices once the new GST rates are finalised. Durables like washing machines, refrigerators, and air conditioners, currently in the highest 28% bracket, are likely to become cheaper under the new regime.

Naveen Malpani, Partner and Consumer & Retail Industry Leader at Grant Thornton Bharat, said the possibility of lower taxes has created a “wait-and-watch” sentiment.

“Internal estimates suggest a potential 25–30% impact on high-ticket segments like air conditioners and refrigerators if GST clarity is delayed. For instance, a ₹1.2 lakh smartphone could become 10% cheaper post-reform, prompting buyers to delay their decisions,” he said.

Royal Enfield, a leader in mid-sized motorcycles, has called upon the government to consider a uniform GST rate for two-wheelers. Currently, automobiles are taxed at 28%, which is the highest GST slab. While the revised GST structure could bring down the tax incidence on smaller bikes to 18%, higher-capacity motorcycles could come under the ambit of higher taxation.

Eicher Motors Executive Chairman Siddhartha Lal, in a LinkedIn post, said that keeping higher-capacity models at a steeper rate would shrink the mid-size motorcycle segment and hurt India’s global competitiveness.

"Raising GST on them would add negligible revenue but contract the segment. For Indian riders, these motorcycles are not luxury goods; they are efficient, affordable alternatives to cars, offering lower fuel use and maintenance - benefits that also help reduce India's fuel imports," Lal said.

While opposition-ruled states have demanded compensation for the revenue loss they would incur post the implementation of the GST rejig, Andhra Pradesh Finance Minister Payyavula Keshav said his state is supporting the Centre's GST rate proposals.

"As an alliance partner, we are supporting the Centre's proposal of GST rate rationalisation. It is in favour of the common man," Keshav told reporters before the Council meeting.

TDP is an ally of the BJP-led NDA government at the Centre.

Apart from Sitharaman, Union Minister for State for Finance Pankaj Chaudhary, Chief Ministers of Delhi, Goa, Haryana, Jammu and Kashmir, Meghalaya and Odisha; Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana; Governor of Manipur; and the Finance Ministers of States/UTs are attending the meeting.

Secretary of the Department of Revenue, Chairman and Members of the Central Board of Indirect Taxes & Customs, and senior officials of the Ministry of Finance are also present.

According to a Bank of Baroda report, the proposed rejig could significantly lower prices of several common household items and consumer durables.

The Swadeshi Jagran Manch (SJM), an RSS affiliate, has written to Finance Minister Nirmala Sitharaman urging that plastic waste and beedi production be kept under the 5% GST slab. Currently, plastic waste attracts 18% GST and beedi production 28%.

Calling for a rollback of the 18% GST on plastic waste, SJM said the higher levy reduces incentives for rag pickers, who form the backbone of India’s waste recycling ecosystem.

The Clothing Manufacturers Association of India (CMAI) has raised concerns over the government’s proposal to increase GST on garments priced above ₹2,500 to 18% from the current 12%. The industry body, which counts over 5,000 members and works with more than 35,000 retailers across the country, said the move would adversely impact both middle-class consumers and organised manufacturers. In a statement, CMAI said the proposed tax hike comes at a time when the apparel industry is already grappling with global headwinds such as the US tariff wars.

“While an immediate reduction in rates can cause a short-term dip of around 3–4% month-on-month revenues typically rebound with sustained growth of 5–6% per month,” it added.

While states have flagged potential shortfalls, the Union government has not released its own estimates of the revenue loss from the proposed tax cuts. The earlier five-year GST compensation mechanism, which cushioned states from revenue shocks, expired in June 2022.

“If states lose 20% of GST revenue, it will destabilise the fiscal structure of state governments across the country,” Karnataka Revenue Minister Krishna Byre Gowda had said.

Opposition-ruled states have warned that the Centre’s proposal to move to a two-rate GST structure of 5% and 18% could result in significant revenue losses. Ahead of the GST Council meeting, a joint statement by eight states, including Tamil Nadu, Himachal Pradesh, West Bengal, and Kerala, said the rejig could cost states between ₹1.5–2 lakh crore annually, with states bearing over 70% of that loss.

The 56th meeting GST Council is now underway as they discuss the Centre's 'next-gen' GST reform proposal of having just two tax rates of 5% and 18% per cent by moving products from the current 12% and 28% slab to lower rates.