Government Announces Revised CGST Rates For Goods From September 22
GST slabs revised; the majority of goods are taxed at 5% and 18%, and ultra-luxury goods at 40%.
The Union Finance Ministry announced revised Central Goods and Services Tax (CGST) rates for goods, effective from September 22, 2025, marking a significant overhaul of India’s GST framework. States are now expected to mirror these changes by notifying corresponding State GST (SGST) rates, as revenues under the GST regime are equally shared between the Centre and states. The new two-tier structure will impose 5% and 18% tax rates on most goods and services, streamlining the existing four-slab system of 5%, 12%, 18%, and 28%. Ultra-luxury items will face a 40% tax, while tobacco and related products will remain in the 28% slab with an additional compensation cess.
The GST Council, comprising central and state finance ministers, approved these changes on September 3, aiming to reduce the tax burden on consumers and simplify compliance for businesses. The rationalisation eliminates the 12% slab and shifts most goods to lower tax brackets, aligning with the government’s goal of benefiting the common man. Industry experts emphasised the need for businesses to swiftly pass on these tax reductions to consumers. Rajat Mohan, senior partner at AMRG & Associates, noted that the notification provides clear schedules for applicable rates, urging businesses to update pricing and supply chain systems to ensure seamless compliance and transparency in reflecting the reduced rates.
The move is expected to ease the cost of living by lowering prices for a wide range of goods, from household essentials to consumer durables. However, the success of this reform hinges on industry cooperation. Saurabh Agarwal, Tax Partner at EY, stressed that businesses must align their Enterprise Resource Planning (ERP) systems, pricing strategies, and supply chains to ensure the benefits reach end consumers. This includes revising invoices, updating tax software, and training staff to comply with the new rates by Monday, when the changes take effect.
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Introduced in July 2017, the GST unified India’s indirect tax regime, replacing multiple state and central levies. The current reform addresses long-standing demands for simplification, as the previous multi-slab structure often led to classification disputes and compliance complexities. With luxury and demerit goods like tobacco retaining higher taxes, the government aims to balance revenue needs with consumer relief, fostering economic growth and affordability.
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