Next-Gen GST to Roll Out from September 22: Key Changes, New Rates, and FAQs Explained

The government is overhauling its tax system with a new Goods and Services Tax (GST) structure, set to go into effect on September 22, 2025. Announced by Finance Minister Nirmala Sitharaman, the "Next-Gen GST Reform" simplifies the tax regime to two main rates—5% and 18%—by merging the previous 12% and 28% slabs.

This change is designed to make essential goods and services more affordable, while higher taxes will be applied to certain luxury and "sin goods." A major part of the reform is the complete removal of GST on all individual life and health insurance policies.

Here’s a breakdown of how the new rates will affect various goods and services.

New Rates on Vehicles and Electronics

• Small Cars: GST on small petrol, LPG, CNG, and diesel cars has been cut from 28% to 18%. This applies to cars with an engine capacity up to 1200 cc (petrol/LPG/CNG) or 1500 cc (diesel), and a length of up to 4000 mm.
• Large Cars and SUVs: Mid-size and larger cars, SUVs, MUVs, and similar vehicles now face a 40% GST rate.
• Motorcycles: Bikes up to 350 cc will be taxed at 18%, while those over 350 cc will see a 40% rate.

Electronics:

• Air conditioners and dishwashers: Reduced from 28% to 18%.
• Televisions and monitors: All sizes are now uniformly taxed at 18%, a significant cut for TVs over 32 inches.
• Batteries: All batteries now have a uniform 18% GST.

Impact on Healthcare and Wellness

• Insurance: A landmark decision exempts all individual life and health insurance policies from GST.
• Medicines and Medical Devices: All medicines and most medical, surgical, dental, and veterinary devices will be taxed at a concessional rate of 5%.
• Beauty and Wellness Services: Services like salons, gyms, yoga centers, and health clubs will now be taxed at 5% (down from 18%).

Changes to Food and Beverages

• Breads: To ensure uniformity, all Indian breads, including roti, paratha, and pizza bread, are now fully exempt from GST.
• Milk: UHT milk is now exempt from GST, while plant-based milks (like soya milk) have been reduced to 5%.
• Packaged vs. Unpackaged Goods: All paneer, whether packaged or unpackaged, is now exempt from GST to support small-scale producers.
• Carbonated Beverages: While carbonated fruit drinks saw an increase in their GST rate to 40%, this change maintains their previous overall tax burden after the compensation cess was removed.

What About Other Sectors?

Transport Services:

Passenger Transport (Road): You can now choose between a 5% GST rate (with no input tax credit) or 18% (with input tax credit).

Passenger Transport (Air): Economy class remains at 5%, while other classes will be taxed at 18%.

Tobacco Products: The existing GST rates and compensation cess on cigarettes, beedis, and chewing tobacco will continue for now, with new rates to be announced later.