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The Indian government has recently announced a major reform to the Goods and Services Tax (GST), simplifying the earlier multi-slab structure down to just two primary rates of **5% and 18%**, with a special **40% rate for luxury and sin goods**. This new GST regime will come into effect from September 22, 2025, aiming to make the tax process simpler for both businesses and consumers, potentially reducing prices on essentials and boosting economic activity[6][7][8][5].

Key Features of the New GST

Only two main slabs will be used: **5% and 18%**[6][8].
A *40% tax rate* will apply to luxury goods, sin products (like alcohol, cigarettes), and select high-end items[5][8].
Essential items, including milk, paneer, chapatis, and paranthas, are totally exempt from GST under the new system[8].
Popular daily-use items such as hair oil, soaps, shampoos, toothbrushes, and many household articles will now be taxed at the lower **5% rate**—down from 12% or 18% earlier[7].
Dining out will be taxed at a flat 5%[8].

Expected Impact

The new GST structure is aimed at giving more *money in hand* to the common man, thereby increasing disposable income[6][7].
Auto sector: Small cars under 1,200cc may shift from a 28% rate to 18%, making them up to 8% cheaper and boosting demand[5].
Businesses and consumers alike will likely see *simplified compliance* and reduced confusion, as the four-tier system is replaced by just two core rates[6][4].
The government expects this reform to stimulate consumption, help small businesses, and improve the overall ease of doing business in India[5][4].
A revenue loss of approximately ₹48,000 crore is predicted but is expected to be offset by higher economic activity and broader tax compliance[6][7].

Timeline and Further Details

This overhaul is being referred to as **GST 2.0**, and its rollout will start on September 22, 2025[6][8].
Discussions continue around further exemptions and the long-term possibility of moving to a single GST rate for all goods by 2047[5].
The changes have already impacted sectors like automobiles, FMCG, and luxury goods, with companies and consumers adjusting their buying and inventory strategies in anticipation of the new rates[5][7].

This reform is seen as one of the most significant changes since GST’s introduction in 2017, with a focus on making taxation fairer and simpler for all stakeholders[4][5][6][7][8].

Citations:
[1] Latest Official Announcements on GST by the Govt of India https://blog.saginfotech.com/gst-late...
[2] Latest GST News, Information, Notifications and ... https://cleartax.in/s/gst-news-and-an...
[3] GST New Rates | Next-Gen GST Reforms: What Are The Common Questions Surrounding GST 2.0?    • GST New Rates | Next-Gen GST Reforms: What...  
[4] Top GST News for the Month | Latest GST Updates https://irisgst.com/top-gst-news-for-...
[5] gst new structure: Latest News & Videos, Photos about gst new structure | The Economic Times - Page 1 https://economictimes.indiatimes.com/...
[6] GST New Rates | What Ordinary Citizens Think About The New GST Reform    • GST New Rates | What Ordinary Citizens Thi...  
[7] GST New Rates | GST 2.0: Decoding The Impact    • GST New Rates | GST 2.0: Decoding The Impact  
[8] GST 2.0 | The New GST Rates Explained LIVE    • GST 2.0 | The New GST Rates Explained LIVE  
[9] Next Generation GST Reforms | GST Council | Latest Update | Drishti IAS English    • Next Generation GST Reforms | GST Council ...  
[10] GST Council | Goods and Services Tax Council https://www.gstcouncil.gov.in/gst-cou...