Pay Just 5% Tax on 99% Goods; No More 12% GST, Announces FM Sitharaman

Household items, packaged foods, and medicines will now fall in the 5 percent slab, starting 22 September 2025.

How often does a simple soap bar or a packet of namkeen feel expensive at the billing counter? Taxes have been a part of that burden. The 56th meeting of the GST Council held on 3 September 2025 in New Delhi has changed that. 

Finance Minister Sitharaman's GST reforms announcement confirmed that almost all goods taxed at 12 percent will now move to the 5 percent slab. This GST tax rate reduced to 5 percent 2025 move will touch every home and is being called the boldest change since the tax was launched in 2017.

Big Update: Goods Moving To Lower GST Slab

The recent decision of the GST Council marks a turning point. Almost all goods that were taxed at 12 percent have been shifted to 5 percent. Officials in the report of the Council have said that this change will start from 22 September 2025. The aim is to reduce the tax load on families and push higher demand.

The change covers food, hygiene products, medicines, and daily use goods.
 

This shift shows that the Council has placed basic needs and kitchen products at the centre of the new tax structure. Families can now expect lower bills on food and hygiene items.

GST Reforms Target India’s Inverted Duty System

The next generation GST reforms in India tax changes are being described as a move to fix the inverted duty system. Under the earlier set-up, the raw material for some sectors was taxed higher than the finished goods. This made production costly and created disputes.

The new reform reduces tax rates for agriculture tools, medicines, and health equipment. These are sensitive sectors where higher taxes were seen as unfair.
 

The Council’s report makes it clear that the goal is not just to lower rates but also to align taxes with social needs. By cutting taxes on medicines and farm goods, the change balances economic need with social welfare.

Link To Earlier Policy Cuts

This GST change is not happening in isolation. Earlier in 2025, the Union Government reduced import duties on edible oils and pulses to fight food inflation. That coverage can be read here: Loansjagat article on GST reduction for essential items.

The same thinking continues in the new tax move. By cutting GST on packaged food and household items, the Centre hopes to bring down inflation and increase spending in rural and urban markets. 

Analysts believe the impact of the GST cut from 12 to 5 percent on the economy will show in higher sales volume, even if revenue falls in the short term.
 

This link with past decisions shows that the GST reform is part of a larger plan. Price cuts through tax tools are being used to manage consumption trends.

Past Moves Of Government And Banks

India has seen selective GST rate cuts before. In 2019, small cars and consumer electronics were moved to lower slabs to give a seasonal push to demand. In 2021, duties on edible oils and pulses were cut for a limited time to ease price rise. Banks and credit agencies had then said that the moves were temporary.

This time, the Finance Ministry has framed the reform as permanent. The Council has called it a structural reset and not just a festival gift. Some items, however, remain taxed heavily. Tobacco, pan masala, and luxury vehicles will stay at higher slabs, with some taxed at 40 percent.
 

This comparison makes clear how the 2025 decision is different. It is not seasonal or selective. It changes the base of the tax system itself.

Wider Meaning Of The Reform

The 2025 report of the GST Council is clear in intent. By cutting rates, the government expects higher compliance, fewer disputes, and simpler tax slabs. The reform reduces four slabs into two broad rates: 5 percent and 18 percent, with a 40 percent demerit rate for harmful goods.

The focus is also on correcting long-standing distortions. By moving basic food and health products into lower or nil rates, the Council sends a message that taxation must respect everyday needs. Businesses will need to adjust pricing and supply chains. States will watch revenue numbers closely since a lower GST may reduce their share in the short term.

Conclusion

The GST Council’s 56th meeting on 3 September 2025 has set a new stage for tax reforms in India. The decision that the GST tax rate reduced to 5 percent 2025 for almost all goods shows a shift in thinking. The Finance Minister Sitharaman GST reforms announcement signals that policy is moving towards simplicity and relief for citizens.

The impact of the GST cut from 12 to 5 percent on the economy will unfold over the next few quarters. For now, consumers can expect cheaper bills and producers can hope for smoother compliance. This 99 percent goods GST reduction under new reforms is more than a policy change. It is a reset of the tax map of India, with a direct effect on the lives of people.
 

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