PM Modi government announces major GST relief ahead of festive season, GST slabs reduced from four to two

In a move that has brought widespread cheer ahead of Dussehra and Diwali, the central government has announced sweeping changes to the Goods and Services Tax (GST) regime. The reforms, described by Prime Minister Narendra Modi as a “Diwali gift to the people,” are aimed at reducing the tax burden on households and simplifying the system for businesses.

The changes, which will take effect on September 22, the first day of Navratri, are being seen as one of the biggest tax relief measures since the rollout of GST.

GST Slabs Reduced from Four to Two

At a key GST Council meeting chaired by Union Finance Minister Nirmala Sitharaman, the government decided to collapse the existing four GST slabs into two. Going forward, only the 5% and 18% rates will remain in force, replacing the earlier 5%, 12%, 18%, and 28% structure.

This major restructuring is being hailed as a “tax revolution” that will particularly benefit the poor and middle class, who form the backbone of the country’s consumer base.

Also read: PM Modi’s Independence Day address: Unveils major defence mission, GST overhaul, and job creation scheme

Daily-Use Items Shifted to Lower Tax Bracket

A wide range of essential and household goods have seen their GST rate slashed from 18% to 5%. This includes:

Food and beverages: Chocolate, coffee, instant noodles, pasta, butter, ghee, sauce, namkeen, preserved meat, corn flakes, salt.

Household items: Toothbrushes, cycles, footwear, clothes, cookware, bedsheets, toothpaste, marble.

Personal care products: Hair oil, toilet soaps, shampoos.

Miscellaneous goods: Handicrafts, leather products, tables, chairs, fertilizers, renewable fuels.

This move is expected to bring substantial relief to consumers, making everyday essentials significantly cheaper.

GST Cuts for Automobiles and Durables

The automobile sector has also received a boost. The GST on cars, bikes, and autos has been reduced, while several big-ticket items have moved from the highest slab of 28% down to 18%. These include:

Cement

Televisions, air conditioners, refrigerators

Motorcycles under 350cc, small cars

Tractors, buses, trucks, three-wheelers, and auto spare parts

This is likely to spur demand in both the automobile and construction sectors, giving a push to economic growth.

Higher GST on Tobacco and Luxury Items

While consumers benefit from lower taxes on essentials, the government has chosen to raise rates on certain categories considered harmful or luxury-driven.

Pan masala, cigarettes, tobacco products: Now taxed at 40%

Soft drinks, non-alcoholic beverages, personal-use aircraft: GST increased further

The government explained that this rebalancing is designed to discourage unhealthy consumption while ensuring that luxury items contribute more revenue.

Zero GST on Healthcare and Education Essentials

In another landmark decision, the government has completely exempted several critical goods and services from GST, bringing relief to families and sectors serving public welfare.

Items and services now at 0% GST include:

33 life-saving drugs and cancer medications

Rare disease treatments

Individual life insurance and health policies

Maps, charts, globes, pencils, sharpeners, crayons, notebooks, pastels, erasers

Milk, paneer, bread, chapati, roti, pizza bases

The exemptions are being welcomed by both the healthcare and education sectors, which had long demanded relief.

Modi Hails the Reforms as a Festive Gift

Following the announcement, Prime Minister Modi expressed his happiness on social media platform X, highlighting that these reforms are aligned with the vision he outlined during his Independence Day address from the Red Fort.

He wrote that the decision represents a “gift for the people this Diwali,” meant to ease the financial burden on families, support the poor and middle class, and strengthen the economy.

Effective from Navratri

The new GST slabs and exemptions will be implemented starting September 22, 2025—coinciding with the beginning of Navratri. The timing, coupled with the festive mood of Dussehra and Diwali, has further amplified the positive reception among citizens.

With these sweeping reforms, the Modi government has positioned the festive season as not just a time of celebration, but also of financial relief and renewed economic momentum.