GST Reforms: Govt Directs Firms To Update Systems, Says Rate Cut Benefits Must Reach Consumers | Business News

Last Updated:September 07, 2025, 08:42 IST

The GST Council led by Nirmala Sitharaman slashes GST to 5 percent and 18 percent slabs from September 22, promising lower prices on essentials, healthcare, education, and more.

The GST rationalisation will boost consumption in the country and push investments, says Finance Minister Nirmala Sitharaman.

GST Reforms: The government has urged Indian companies to update their systems immediately, so that the new rates (5% and 18%) will be picked up by their systems for generating invoices from September 22. It has also reiterated that the rate cut benefits must pass down to consumers and they should not hold back any benefits accrued due to this rate cut with themselves.

Moreover, the government said that the department is closely monitoring price trends pre-cut and post-cut and will intervene if there’s a requirement. “we will be ready to take that to ensure that benefits are ultimately passed on to consumers,” Nirmala Sitharaman Office wrote in the X post.

It added that various chambers and associations have given their assurances to pass down the benefits to customers. “But, we are otherwise confident that industries on their own will pass on the benefits. These kinds of assurances are being given by various chambers and associations to us,” the post said.

In a sweeping reform, the GST Council, led by Finance Minister Nirmala Sitharaman, has approved a sharp overhaul of the Goods and Services Tax (GST) structure. Effective September 22, the system will be simplified into just two main slabs of 5% and 18%, replacing the current 12% and 28% rates, with a special 40% slab for luxury and sin goods. Billed as a “historic Diwali gift” for citizens and businesses, the reforms aim to lower the cost of living, boost consumption, and spur economic activity.

Big Savings on Essentials: Household products like hair oil, shampoo, toothpaste, toilet soaps, shaving cream and toothbrushes will now attract just 5% GST instead of 18%. Rates on butter, ghee, cheese, packaged namkeens, dairy spreads and utensils have been cut from 12% to 5%. Feeding bottles, clinical diapers and sewing machines too move into the lowest slab.

Healthcare Relief: Health and life insurance premiums, earlier taxed at 18%, are now exempt. Medical-grade oxygen, diagnostic kits, glucometers, test strips, corrective spectacles and thermometers will all attract only 5%.

Education Boost: Learning materials such as maps, charts, globes, notebooks, pencils, crayons, sharpeners, pastels and erasers have been fully exempted from GST.

Support for Farmers: Tractor tyres and parts now fall under 5% (down from 18%), while tractors drop from 12% to 5%. Bio-pesticides, micro-nutrients, drip irrigation systems and agricultural machinery also join the lower slab, easing input costs for farmers.

Cheaper Automobiles: Petrol, diesel and CNG cars within specified categories, earlier at 28%, will now face only 18%. The same applies to three-wheelers, motorcycles up to 350cc and commercial vehicles for goods transport.

Lower Prices for Appliances: Consumer durables including air conditioners, large televisions, monitors, projectors and dishwashers shift from 28% to 18%, making big-ticket appliances more affordable.

Process Reforms: Beyond rate cuts, the Council cleared procedural improvements such as automatic GST registration within three working days, provisional refunds via system-based evaluation, and simplified input tax credit rules.

Varun Yadav

Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More

Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More

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