Rationalizing commodity and services tax to enhance growth with low basics, cars, and devices: Report

The Temple and Services Tax Structure in India (GST) has underwent its most important repair since its launch, with full prices through agriculture, cars, hardware, textiles and daily necessities. According to the monthly economic review of the RBI (August 2025), it is expected to stimulate consumption changes, reduce inflationary pressures, and provide a batch in a timely manner for general economic activity.

It is expected that the reforms of the commodity and services tax that entered into force on Monday (22 September 2025) will reduce home expenditures on grocery stores and daily necessities by 13 %, while small car buyers may provide approximately 70,000 rupees. Government estimates indicate that the purchases of stationery, clothing, shoes and medicines will bring savings within 7-12 %. In addition, savings can rise to 18 % on health and individual health insurance policies, which are now exempted from goods and services tax.

Main changes

The Commodity and Services Tax Council simplified the tax system into a dual-mode-a standard rate of 18 % and the merit rate of 5 %, along with a 40 % plate for the chosen goods.

Agriculture: GST has been reduced on agricultural tractors and machines from 12 % to 5 %. Fertilizer inputs such as sulfuric acid and ammonia are also reduced to 5 % of 18 %.

Cars: small cars, motorcycles less than 350 cm, three wheels, buses, and ambulances, now attract 18 % of commodity and services tax, a decrease from 28 %. Car parts are unified by 18 %.

Electronics: Large TVs, screens, dishwashers and air conditioners have been moved to 18 % of 28 %.

Textile textiles and goods: The tax of goods and services on human fiber and spinning has been reduced to 5 % (from 18 % and 12 %). Handicrafts, marble, and leather goods also decreased to 5 %.

Daily basics: toothpaste, soap, hair oil, bicycles and kitchen tools now decreases less than 5 %. Paper Paneer, UHT Milk, and all Indian bread is exempt from taxes.

Health care: Life rescue medications are exempt, while other medications have been reduced to 5 % of 12 %.

Services: Hotels with less than 7500 rupees per night have been reduced, and well -being services such as gyms and salons have been reduced to 5 %.

Economic impact

As mentioned in the RBI review, the GST rationalization has completed the previous discounts of corporate tax and tax repairs on income, which constitutes a three -sided financial payment for the order. In conjunction with low inflation and reducing the rate of modern RBI policy, measures create conditions for accelerated growth.

Economists believe that families will benefit from low costs, and companies will witness low input expenses, and the consumption of cars and devices will rise. This reflects this optimism, OECD recently sparked growth forecasts in India from 2025 to 6.7 %, noting the repair of commodity and services tax as a major motor.

With the upcoming holiday season, policy makers expect that reforms support demand, enhance the formal character, and in line with the government’s broadest strategy in India.

On Sunday (September 21, 2025), Prime Minister Narendra Modi praised, in his speech to the nation, for reforms as “reforms from the next generation” and congratulated the citizens for what he called the “GST Festival”.

The Prime Minister highlighted how the re -structuring GST rates make the daily elements more affordable, which improves the life of the poor middle class, and the emerging middle class. He also reiterated the importance of buying manufactured goods in India, saying: “The prosperity of India will gain its strength from Swadshi talisman.”