India slashes GST slab to 5% and 18%, raises tax on tobacco, cars, sugary drinks to 40%
Dubai: Indian expats in the UAE will soon see big changes in the way goods and services are taxed back home. In a landmark decision, the GST Council, led by Finance Minister Nirmala Sitharaman, has overhauled India’s indirect tax structure.
From September 22, 2025, India will move from four tax slabs to just two – 5% and 18%. The 12% and 28% rates have been scrapped, making the system simpler and easier to follow.
For ordinary families, this means many day-to-day items will become more affordable. Personal care products like shampoo, toothpaste, hair oil, and dental floss will now attract only 5% GST instead of 18%. Popular packaged snacks such as namkeens, bhujia, mixtures, and other ready-to-eat items will also see their tax rate cut from 12% to 5%. This could bring down prices and ease pressure on household budgets.
While essentials get cheaper, items seen as harmful or luxurious will cost more. The Council has raised the tax on tobacco products – including cigarettes, cigars, gutkha, chewing tobacco, bidi, and pan masala – from 28% to 40%.
Luxury cars with large engines and sugary, flavoured, and carbonated drinks will also fall under the new 40% slab. The idea is to discourage consumption of products that hurt health or are considered luxury indulgences, while raising more money for welfare spending.
Alcohol, though, remains outside the GST framework. It will continue to be taxed separately by individual states.
The higher tax burden will hit companies dependent on tobacco. For instance, ITC Ltd, which earns most of its profits from cigarettes, could face pressure. But analysts believe the move also reduces uncertainty, giving companies clearer visibility on policy changes. On the other side, consumer goods firms may see demand pick up thanks to lower prices on everyday products.
The GST overhaul is part of the government’s next-generation reforms. Prime Minister Narendra Modi had earlier signalled these changes in his Independence Day speech, stressing the need to simplify tax rates, cut disputes, and make life easier for ordinary citizens.
The reform aims to:
Reduce disputes over classification.
Correct tax distortions in certain industries.
Create more stability in rates.
Support growth in key economic sectors.
By cutting taxes on essentials while raising them on sin and luxury items, the government hopes to boost demand, stimulate growth, and strengthen public finances.
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