03/10/2025
New GST rate structure
The GST Council has replaced the old multi-slab system (5%, 12%, 18%, 28%) with a simplified two-rate structure, along with special rates for certain items.
0% (Exempt): Essential food items (milk, paneer, bread), specific life-saving drugs, and individual health and life insurance premiums are now exempt.
5% (Merit Rate): Many essential household and food items previously taxed at 12% or 18% have been moved to this lower slab. This includes items like packaged foods, butter, ghee, soap, and toothpaste.
18% (Standard Rate): This is the new standard rate for most goods and services. Many items previously taxed at 28% have been moved here, such as consumer electronics (ACs, TVs), cement, and small cars.
40% (Demerit Rate): A new higher rate has been introduced for luxury and "sin" goods, including premium cars, large motorcycles, yachts, aerated drinks, casinos, and online gaming. This replaces the previous 28% GST plus cess structure for these items.
3% and 0.25%: Existing special rates for gold, precious metals, and diamonds remain unchanged.
Note on To***co: While eventually moving to the 40% slab, to***co and related products will temporarily continue to be taxed at the old rates plus compensation cess until pending loans to states are repaid.
Key rate changes by category
Food and Household Items: Many staples and daily-use products are now cheaper. For example, GST on UHT milk and Indian breads is now 0%, while packaged foods like namkeen, chocolates, and coffee have moved to the 5% slab.
Automobiles: Small cars (under 4m length, 1200cc petrol/1500cc diesel), motorcycles up to 350cc, and auto parts have been moved from the 28% slab to 18%.
Healthcare: 33 life-saving drugs and individual health/life insurance premiums are now exempt. Other medicines, diagnostic kits, and medical oxygen have been shifted to the 5% slab.
Consumer Electronics: Large televisions (over 32 inches), air conditioners, and dishwashers are now taxed at 18%, down from 28%.
Services: Hotel stays with tariffs up to ₹7,500 and services at gyms, salons, and yoga centers are now taxed at 5%.
Procedural and compliance changes (effective from April/July 2025)
Several changes aim to improve security, reduce fraud, and simplify compliance for businesses.
Mandatory ISD Registration (April 1, 2025): Businesses with multiple GST registrations under one PAN must now use the Input Service Distributor (ISD) mechanism to distribute input tax credit (ITC) for common services.
Biometric Authentication for Directors (March 4, 2025): Company directors must undergo biometric authentication at GST Suvidha Kendras to strengthen the registration process.
New e-Way Bill System (July 1, 2025): A new e-Way Bill 2.0 portal has been launched to operate in sync with the old one, aiming for better security and tracking of goods.
E-invoicing Time Limit: The 30-day window for reporting e-invoices has been extended to taxpayers with an annual turnover over ₹10 crore, effective April 1, 2025.
Hard-locking of GSTR-3B Liability (July 2025): From July 2025, the liability in GSTR-3B will be non-editable and auto-populated based on GSTR-1 filings. Corrections must be made via the new GSTR-1A form.
3-Year Filing Limit for Old Returns (July 2025): GST returns older than three years from their due date will be permanently blocked from being filed.
Mandatory Multi-Factor Authentication (April 1, 2025): All taxpayers must use MFA to log in to the GST portal, regardless of turnover.
New Invoice Series (April 1, 2025): Taxpayers are required to start a fresh, unique invoice series at the beginning of the new financial year.
