The 56th GST Council meeting has delivered what many consider the most significant tax reform since the launch of GST in 2017. From making insurance more affordable to reducing costs on everyday items, these changes promise to reshape India’s economic landscape, putting more money back in citizens’ pockets.
Simplified Tax Structure Benefits Everyone
The complex four-tier GST system is being replaced with a cleaner structure: 5% for essentials, 18% for standard items, and 40% for luxury and harmful goods. This simplification eliminates the confusion that has long plagued businesses and consumers.
“The GST reform is not just a tax update, it is a milestone in India’s economic journey since 2017,” said Varun Gupta, Co-Founder of GOBOULT. “For everyday Indians, it brings immediate relief with lower rates on essentials like food, medicines, insurance, and household goods.”
Healthcare and Insurance Get Major Relief
The most impactful change affects health coverage. Individual health insurance policies, including family plans and senior citizen policies, will now attract a 5% GST rate instead of the previous 18%. Life insurance policies become completely GST-free, making protection affordable for millions of families.
Essential medicines also see dramatic reductions – 33 lifesaving drugs become GST-free, while other medications drop from 12% to 5%. Medical equipment and devices also benefit from reduced rates, which can lower healthcare costs across the board.
Daily Essentials Become Cheaper
Kitchen staples like paneer, UHT milk, and Indian breads will be exempt from GST. Popular food items, including chocolates, instant noodles, sauces, and cornflakes, drop from 12-18% to just 5%. Even household items like soap, shampoo, toothpaste, and bicycles see their tax burden reduced by half.
Electric Vehicles Get Major Boost
The reforms include a game-changing decision for India’s electric vehicle sector. “The government’s decision to keep all EVs—whether mass market or luxury SUVs—under the 5% GST slab without any additional cess is a progressive step that will have a significant impact on adoption,” said Vasudha Madhavan, Founder & CEO of Ostara Advisors.
This uniform treatment removes tax disparities between different EV segments. “By removing the tax disparity between smaller EVs and larger SUV models, the policy creates a level playing field, improves affordability, and encourages greater consumer choice,” Madhavan explained. “It signals India’s intent to make EVs mainstream rather than niche.”
Industry Leaders Welcome Changes
The automobile sector is celebrating significant relief, with cars and motorcycles under 350cc moving from a 28% GST rate to 18%. “The new GST rate cut from 28% to 18% will make electronic items like televisions and air-conditioners significantly more affordable,” noted Anurag Sharma, MD & CEO of AKAI India, estimating savings of ₹3000-5000 on major appliances.
Flipkart’s Rajneesh Kumar emphasized the broader impact: “These reforms will further strengthen India’s growth engine by lowering input costs for farmers, simplifying compliance for MSMEs, and enabling small sellers to join e-commerce across states seamlessly.”
Implementation Timeline
Most changes take effect from September 22, 2025, perfectly timed for the festive season. However, tobacco products will continue to maintain higher rates until compensation obligations are fully met, demonstrating the government’s balanced approach to reform and fiscal responsibility.
The establishment of the Goods and Services Tax Appellate Tribunal by December 2025 will provide faster dispute resolution, addressing a long-standing concern of businesses.
These reforms represent more than tax cuts – they signal India’s commitment to citizen-centric governance and economic growth that benefits everyone from farmers to tech entrepreneurs.
