PM Modi's Historic GST Announcement

In his 79th Independence Day address from the ramparts of the Red Fort, Prime Minister Narendra Modi announced next-generation GST reforms as a Diwali gift for citizens, declaring, "This Diwali, I am going to make it a double Diwali for you." The announcement marks the most comprehensive overhaul of India's indirect tax system since GST's introduction in 2017.

The GST Council on September 3, 2025, approved the rationalization of rates with a focus on the common man, simplifying the indirect tax system from a four-tier structure (5%, 12%, 18%, and 28%) into a two-tier structure of 5% and 18%, with reforms taking effect from September 22, 2025.

New GST Slab Structure 2025

GST 2.0 Overview

The 56th GST Council meeting unveiled GST 2.0 - next-generation reforms simplifying tax slabs to 5%, 18%, and 40%, effective from September 22, 2025. The new structure includes:

Merit Rate (5%): Essential items and priority sectors

• Food products, packaged namkeens, chocolates, instant noodles

• Daily essentials: hair oil, shampoo, toothpaste, toilet soap

• Agricultural equipment and renewable energy devices

• Sports goods and bicycles

• Marble blocks, fly ash bricks

Standard Rate (18%): Most goods and services

• Consumer electronics (TVs, ACs, washing machines - reduced from 28%)

• Mobile phones and laptops (unchanged)

• Cement (reduced from 28%)

• Small cars and motorcycles

• Professional services

De-merit Rate (40%): Luxury and sin goods

• Premium cars and motorcycles

• Aerated beverages

• Tobacco products (pending - see details below)

• Yachts and private aircraft

Special Rates:

• 0%: Essential food items, health insurance, life insurance

• 3%: Gold and silver

• 0.25%: Cut and polished diamonds, precious stones

What Gets Cheaper: New GST Rate Changes

Major Price Reductions

Daily Essentials (12%/18% → 5%): Reduction of GST on common man items such as hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware, and other household articles

Food Items (Various → 5% or 0%): Reduction of GST from 5% to NIL on Ultra-High Temperature (UHT) milk, pre-packaged and labelled chena or paneer; all Indian breads will see NIL rates (Chapati, roti, paratha, parotta, etc.). Reduction from 12% or 18% to 5% on almost all food items such as packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, ghee

Home Appliances (28% → 18%): Reduction from 28% to 18% on air-conditioning machines, TVs over 32 inches, dishwashing machines, small cars, motorcycles. The tax rate on devices like air conditioners, TVs, and dishwashers has been slashed to 18%.

Construction Materials: Cement reduced from 28% to 18%, potentially saving homeowners significant amounts. For a ₹30 lakh home construction, savings could reach ₹60,000-₹70,000.

Healthcare: GST on individual health and life insurance has been made exempt

GST on Mobile Phones 2025

Mobile Phone Rates Unchanged

The GST on mobile phones remains unchanged at 18%, as mobiles and laptops were already at 18% and continue in the standard goods category. The current GST rate on mobile phones is 18% under HSN code 85171219.

Why No Change?

• Already in standard slab (not luxury)

• Smartphones form one of India's largest consumer markets

• Revenue considerations for the government

Calculation Example: For a mobile phone priced at ₹25,000:

• GST at 18% = ₹4,500

• Total price = ₹29,500

Mobile accessories (chargers, earphones, cases) also remain at 18% GST.

Cement GST Rate 2025

Major Relief for Construction

The GST on cement has been reduced from 28% to 18%, offering significant relief to the construction industry and homebuyers.

Impact:

• 100 cement bags (₹1,000 each): GST drops from ₹28,000 to ₹18,000 (saving ₹10,000)

• For 1,000 sq ft house (~₹30 lakh project): Total GST savings approximately ₹60,000-₹70,000

• According to industry experts, the reduced GST on construction materials like cement can reduce construction costs by 3-5%

Implementation Timeline

Phased Rollout

The Council decided that changes in GST rates will be implemented in a phased manner:

September 22, 2025:

• All service sector changes

• All goods except tobacco products

Later Date (Post Compensation Cess Settlement):

• Pan masala, gutkha, cigarettes, chewing tobacco, unmanufactured tobacco, and bidi will continue at existing rates until loan and interest payment obligations under compensation cess are discharged

Modi's Vision: GST 2.0 for Neo Middle Class

Focus on Common Man

PM Modi's GST 2.0 is more than a tax tweak — it's a step towards inclusive growth that puts the common citizen first, aimed at benefiting low-income and middle-class families, small traders, big businesses, and entrepreneurs.

The reforms are designed to:

• Simplify tax structure and reduce compliance burden

• Make goods cheaper for households

• Support MSMEs with smoother operations

• Boost consumption and economic growth

• Address global trade challenges

Complete GST 2.0 New Rate List

Comprehensive Item-wise Changes

Items Moving to 0% (Exempt):

• All Indian breads (chapati, roti, paratha)

• UHT milk, paneer, chena

• Individual health insurance policies

• Individual life insurance (term, ULIP, endowment)

Items Moving to 5% Merit Rate:

• Hair oil, shampoo, soap, toothpaste, toothbrush

• Packaged foods: namkeens, sauces, pasta, chocolates

• Sports equipment and bicycles

• Solar panels and renewable energy devices

• Agricultural inputs

• Marble blocks, fly ash bricks

Items Moving to 18% Standard Rate:

• Air conditioners (from 28%)

• Televisions all sizes (from 28%)

• Washing machines, dishwashers (from 28%)

• Cement (from 28%)

• Small cars and motorcycles (from 28%)

• Mobile phones (unchanged)

• Laptops and computers (unchanged)

Items in 40% De-merit Slab (New):

• Premium cars (above ₹15 lakh, >1500cc)

• Premium motorcycles (>350cc)

• Aerated beverages

• Luxury yachts, private aircraft

PM Modi's Address to Nation: Key Highlights

Modi Live: Historic Announcement

During his Independence Day speech, PM Modi addressed several key reforms:

1. GST Simplification: Reducing burden on common man

1. Diwali Gift: Double celebration with tax relief

1. Economic Vision: Supporting Viksit Bharat 2047

1. MSME Focus: Easier compliance and lower costs

1. Consumer Benefits: Making essentials affordable

In the backdrop of global trade tensions and tariff policies, this move aims to strengthen India's financial sovereignty and boost domestic consumption.

Updated GST Rates: Category-wise Breakdown

Electronics & Gadgets

• TVs: 28% → 18%

• Air Conditioners: 28% → 18%

• Washing Machines: 28% → 18%

• Dishwashers: 28% → 18%

• Mobile Phones: 18% (no change)

• Laptops: 18% (no change)

• Monitors & Projectors: 28% → 18%

Automobiles

• Small Cars: 28% → 18%

• Motorcycles: 28% → 18%

• Buses (≤10 seats): 28% → 18%

• Ambulances: Reduced rates

• Luxury Cars: 28% + cess → 40%

Construction Materials

• Cement: 28% → 18%

• Fly Ash Bricks: 5% (unchanged)

• Clay Bricks: 5% (unchanged)

• Marble Blocks: 12% → 5%

• Steel Products: 18% (unchanged)

• Ceramic Tiles: 18% (unchanged)

Daily Essentials

• Personal Care: 18% → 5%

• Packaged Foods: 12%/18% → 5%

• Indian Breads: All NIL

• Dairy Products: Selected items NIL

• Sports Goods: 12% → 5%

GST News: Latest Updates September 2025

Key Developments

1. CBIC Notifications: CBIC issued Notification No. 15/2025-Central Tax (Rate) dated September 17, 2025, revising several GST rates on services effective from September 22, 2025

1. HSN Code Requirements: Starting May 2025, businesses with turnover up to ₹5 crore must report 4-digit HSN codes; those exceeding must use 6-digit codes

1. Refund Mechanism: Administrative implementation of revised refund system pending CGST Act amendments

1. State Revenue: Reforms designed to strengthen state revenues while providing consumer relief

FAQs: Common Questions Answered

Q: When do new GST rates come into effect? A: September 22, 2025 for most goods and services; tobacco products at a later notified date

Q: Will mobile phone prices decrease? A: No, mobile phones remain at 18% GST with no price change expected from GST reforms

Q: How much can I save on home construction? A: Approximately 2-3% of total project cost due to reduced cement and material GST rates

Q: Are all insurance policies now tax-free? A: Individual health and life insurance policies are now exempt from GST

Q: What is the GST on luxury cars? A: 40% flat rate replacing the previous 28% + cess structure

Q: Will electricity bills increase due to coal GST? A: No additional burden as compensation cess has been merged with GST rate

Impact Analysis: Winners and Beneficiaries

Who Benefits Most?

Consumers:

• Lower prices on daily essentials and appliances

• Tax-free health and life insurance

• Affordable home construction

MSMEs:

• Simplified compliance

• Reduced working capital requirements

• Easier bookkeeping with fewer slabs

Manufacturers:

• Corrected inverted tax structures

• Better cash flow management

• Competitive pricing ability

Construction Sector:

• Reduced material costs

• Boost to affordable housing

• Increased demand potential

Expert Reactions to Modi's GST 2.0

Industry experts believe this is a "timely and strategic move to build a resilient Indian economy." The announcement aims to make exports more competitive and boost domestic consumption.

Tax professionals note that the rationalization from four slabs to two will:

• Reduce classification disputes

• Speed up refund processing

• Lower litigation costs

• Improve ease of doing business

Conclusion: A Gift for Every Indian

The next-generation GST reforms represent India's commitment to tax simplification and economic growth. By fixing inverted tax structures, these reforms will free up working capital, improve manufacturing competitiveness, and support Atmanirbhar Bharat goals.

As PM Modi promised, this Diwali 2025 will indeed be a "double Diwali" for millions of Indians as they enjoy lower prices on everything from soap to smart TVs, insurance to automobiles, and cement to packaged foods.

Key Takeaways: ✓ New 5%-18% two-slab structure from Sept 22, 2025 ✓ Daily essentials now at 5% (from 12%/18%) ✓ Home appliances at 18% (from 28%) ✓ Cement at 18% (from 28%) ✓ Mobile phones unchanged at 18% ✓ Health & life insurance now tax-free ✓ New 40% slab for luxury/sin goods ✓ Simpler compliance for businesses ✓ Focused on common man, neo middle class

The reforms showcase India's evolution as a mature economy, balancing revenue needs with citizen welfare while positioning the country for sustained growth in a challenging global environment.