GST Rate Update 2025: Major Changes Effective from 22nd September

 

Introduction

The Government of India has recently announced significant changes to the GST rates, effective from 22nd September 2025. These changes will impact everyday essentials, luxury goods, insurance, hotels, and automobiles. Businesses and consumers alike need to stay updated with the revised tax slabs to plan their expenses effectively.

In this blog, we break down the new GST rate update, compare it with the old rates, and explain how it will affect daily purchases, services, and the overall economy.

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Key Highlights of the GST Rate Update 2025

1. Daily Essentials – Soap, Shampoo, Toothpaste, etc.

• Old Rate: ~18%

• New Rate (from 22nd Sept 2025): 5%
  Impact: A major relief for households, as basic personal care items will now be taxed at a much lower rate, reducing the cost burden on consumers.

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2. Dairy Products – Butter, Ghee, Cheese, Dairy Spreads

• Old Rate: ~12–18%

• New Rate: 5%
  Impact: Dairy essentials will now be more affordable, helping both urban and rural consumers. This is expected to boost the dairy industry by increasing consumption.
  
  
  

  
  
  

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3. Pre-Packaged Foods – Paneer, UHT Milk, Bread

• Old Rate: ~5–18%

• New Rate: 0% (nil) or reduced (some items moved to exempt category)
  Impact: Everyday grocery items are now either tax-free or taxed at minimal rates, making packaged food products cheaper.

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4. Small Cars & Consumer Durables (TV, AC, Fridge)

• Old Rate: 28%

• New Rate: 18%
  Impact: The reduced GST will make cars and durable goods more affordable, benefiting the middle class and boosting the automobile and electronics sectors.

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5. Luxury & Sin Goods – High-End Cars, Aerated Drinks

• Old Rate: 28% + Cess

• New Rate: 40% (single slab replacing earlier GST + cess)
  Impact: High-end luxury products and sin goods now fall under a 40% GST slab, discouraging excess consumption but simplifying tax structure.

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6. Hotels with Rooms under ₹7,500 per Night

• Old Rate: 12% (with ITC earlier)

• New Rate: 5% without ITC
  Impact: More affordable hotel stays for travelers, though businesses may lose Input Tax Credit (ITC) benefit.

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7. Health & Life Insurance

• Old Rate: 18%

• New Rate: Exempt / Zero GST
  Impact: A welcome move for individuals, as life and health insurance policies are now exempt from GST, making coverage more accessible.

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How Will the GST Rate Update Affect You?

• Consumers: Reduced burden on daily essentials and packaged foods.

• Businesses: Need to realign invoicing, pricing, and compliance according to new GST rates.

• Economy: Higher demand for essential goods and durable products due to reduced prices, while luxury segments may face a slowdown.

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Conclusion

The GST rate update of 22nd September 2025 brings relief to the middle class by reducing taxes on essentials while increasing taxes on luxury and sin goods. For businesses, timely compliance with the revised GST slabs is crucial.

If you need professional assistance with GST Registration, GST Return Filing, and Tax Consulting, connect with us at Power of Factorial Business Solutions – Auditor & Tax Consultant in KR Puram, Bangalore.

📞 Contact: +91 81050 21287
🌐 Visit: www.poweroffactorial.in

FAQs on GST Rate Update 2025

1. From when are the new GST rates applicable?
The revised GST rates are effective from 22nd September 2025.

2. Are dairy products like paneer and milk exempt from GST now?
Yes, many pre-packaged dairy products like paneer and UHT milk have been moved to the nil GST category.

3. What is the GST rate for hotels under ₹7,500 per night?
Hotels now attract 5% GST without ITC instead of the earlier 12% with ITC.

4. Has GST on small cars been reduced?
Yes, the GST on small cars has been reduced from 28% to 18%.

5. Are life and health insurance policies taxable under GST?
No, they are now exempt from GST.