NEW DELHI, Sept 4,2025: Finance Minister Nirmala Sitharaman unveiled tax cuts for hundreds of consumer items, from soap to cars, in the biggest overhaul of the goods and services tax (GST), set to take effect from September 22.
Here are key highlights:
MAJOR CHANGES
India will have two key tax rates of 5% and 18% from September 22, versus four now. A new tax slab of 40% will apply to high-end goods, but all additional levies above that are to be abolished, bringing down effective tax rates on mid-size and big cars.
REVENUE LOSS, INFLATION IMPACT
The government estimates the cuts will cause revenue loss of 480 billion rupees ($5.5 billion), far lower than economists’ estimate ranging from 1 trillion rupees to 1.8 trillion rupees.
India’s retail inflation rate fell in July to its lowest in eight years.
TAX CUTS ON DAILY ITEMS
A tax panel approved lower GST of 5% on items of everyday use such as packaged food, medicines, toothpaste, fruit, milk products, talcum powder and shampoo, against 12% to 18% now.
It will abolish tax on individual life and health insurance products sold by companies such as LIC
The government has cut taxes on items such as cars, TVs and even cement, which could boost sales during the festival season that typically runs from the last week of September until November. India’s tax panel also cut GST on air conditioners, ambulances, dishwashers, three-wheelers and hybrid vehicles.
The tax panel also lowered the effective tax for big cars to 40% from the current rate of as much as 50%, making cars from Mercedes-Benz , AUDI and BMW, opens new tab attractive. GST on EVs was kept at 5%, giving relief to carmakers such as Tata Motors (TAMO.NS), opens new tab and Mahindra & Mahindra after a panel recommended an increase.
Government lowered taxes on fertiliser and tractors to help lower costs for farmers, recently come in the spotlight as Prime Minister Narendra Modi vowed to protect them following a breakdown in India-U.S. trade talks.
