New GST Rates Are Here! Car Prices May Drop by Up to 18%

India's GST relief is finally here! The new tax regime, rolled out by the GST Council and Finance Minister Nirmala Sitharaman, reduces rates on essential goods and cars and brings outstanding relief to households, businesses and the common man.

Prime Minister Narendra Modi announced these transformative GST reforms on August 15, which are in line with India’s vision of economic empowerment and ease of living.

Major changes that will lower taxes on a wide range of products, benefiting millions of consumers. The new reforms will introduce a two-slab GST system, with rates of 5% for essential items and 18% for most goods, starting from September 22.

The new GST regime comes at a time when India’s GDP has crossed USD 4.19 trillion, encouraging its rise as a global economic powerhouse set to become the 3rd largest economy by 2028.

GST 2.0: Key GST Changes Reshape Daily Life

The new GST system features just two main slabs of 5% and 18%, replacing the confusing jumble of 5%, 12%, 18% and 28%. This means more products and services now attract a lower tax, creating direct savings on nearly every bill. From kitchen shelves to living rooms, consumers will feel the difference.

1. Automobiles & Electric Vehicles: The tax on small cars (under 1200cc) and motorcycles (up to 350cc) drops from 28% to 18%—a game changer that could make cars up to 10% cheaper for first-time and middle-class buyers. Electric vehicles (EVs) remain at a low 5%, further boosting green mobility.

2. Health & Insurance: GST on all individual health and life insurance policies is now exempt, a vast relief that boosts coverage and relieves monthly budgets. Medical-grade oxygen, essential drugs and bandages are down to 5% GST, cutting hospital bills across the board.
3. Household Goods & FMCG: Hair oils, toothpaste, soaps, cycles, tableware and other everyday household products move to 5% GST (from earlier 12/18%), implementing visible price cuts at shops nationwide. Popular food items noodles, sauces, chocolates, UHT milk, Indian breads either see GST rates halved or go totally tax-free or nil.

4. Beauty & Wellness: Gyms, salons and related services now attract only 5% GST, down from 18%, making lifestyle services affordable for all.

5. Agriculture & Business: Farm machinery and critical bio pesticides go down to 5% GST, helping farmers save and powering rural growth. Footwear under Rs 2,500 also gets GST relief and registration/refund processes are now quicker and easier for MSMEs, exporters and traders.

These progressive tax reforms signify India’s commitment to simplifying its tax system while driving inclusive growth across all sectors of middle class, farmers, women and businesses.

Also Read: Nomura Sees 5-10% Rise in Auto Demand from GST Reduction.

What Gets Cheaper, What Gets Costlier

Most other goods and services fall under the 5% or 18%, making this the easiest GST 2.0 system yet to understand and comply with.

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Reduces GST Benefits Consumer & Business

• Lower costs: Expect direct, visible cuts on everything from cars to groceries and personal care.
• Simplified tax: Fewer slabs mean fewer surprises and easier tax planning for households, the middle class and companies.
• Business boost: Simplified GST registration/refund, less paperwork and sectoral support (such as cement down to 18%) offer immediate benefit to MSMEs, farmers and service providers.
• Faster refunds: Exporters and non-risky businesses get refunds within 7 days, thanks to reformed GST processes.
• Eyes on Growth: Economists project these GST changes will directly add 1–1.2% to India’s GDP over the coming quarters, driving demand, jobs and manufacturing spin-offs.

Prime Minister Narendra Modi and the Finance Ministry have radical shifts toward reforms, crafted to reduce the burden on the middle class, women, MSMEs, and farmers and to simplify India’s indirect tax framework for the next decade.

GST Changes Regulated by – September 22

The changes roll out on the first day of Navaratri, just as festival shopping peaks. Businesses are adjusting inventories and pricing, expecting a sharp spike in demand for cars, bikes, TVs, and household goods this festive season.

The GST Council expects that the reforms’ direct cost savings, especially for health, like cancer treatment, wellness and basic groceries, will benefit every Indian home and reactivated consumer confidence across the country.

India’s GST 2.0 signals a progressive new era for shoppers, families and entrepreneurs, lower bills, clean and clear tax rules and a big change for the economy.

Get ready for easier purchases, simpler bills and this reform rates starting September 22!