New GST regime from October 1; Here’s what gets cheaper and what turns costlier

September 23, 2025 by News Desk

Photo/ Diplomat

India’s Goods and Services Tax (GST) underwent a sweeping revision this week, aimed at simplifying the tax structure and easing costs for consumers. The government has reduced rates on several essential items and household products, while increasing taxes on certain goods and services. Experts, however, warn that despite headline reductions, hidden costs and uneven implementation could offset the benefits.

According to the revised rates, staples like dairy products, packaged foods, bicycles, and certain household appliances have seen reductions in GST, with rates falling from 12% to 5% or from 28% to 18% in some cases. Fertilizers and agricultural inputs have also been made cheaper, aiming to reduce the burden on farmers. Conversely, other household items, tobacco, alcoholic beverages, automobiles, and select private services now attract higher GST, in some cases up to 40%, raising concerns about affordability for middle and high-income consumers.

Analysts highlight that logistical factors and packaging costs could undermine the benefits. For example, while GST on food items has been reduced, packaging materials for agricultural products may still attract a higher rate, which could increase costs for farmers and traders. Additionally, businesses may delay passing on GST reductions to consumers, and compliance costs for small enterprises could rise.

“The new GST rates are designed to simplify the tax structure and provide relief, but consumers need to be aware of hidden costs,” said a senior economist at a Delhi think tank. “While your butter or bicycle may be cheaper, products with high packaging or luxury components may become costlier, and the benefit is unevenly distributed.”

Since its launch in 2017, GST has been widely criticized for its crushing impact on small businesses, particularly those in manufacturing, retail, and agriculture-related sectors. Compliance costs, complex filing requirements, frequent rate changes, and delayed refunds have forced many small enterprises to either shut down or operate at razor-thin margins, while informal businesses struggled to formalize under the new tax regime.

Despite promises of simplification, the bureaucracy and rigid penalties have disproportionately burdened micro and small businesses, eroding their competitiveness. The new GST rates, announced in September 2025, are set to be implemented from October 1, 2025, and while they aim to ease costs on certain essentials, experts warn that the legacy of administrative complexity and uneven enforcement may continue to affect smaller players.

The government has emphasized that the revised rates are part of an effort to balance revenue collection with economic stimulus, but the impact on households will depend on how quickly businesses adjust pricing and pass on the benefits.

Comparison of Price Changes: What Gets Cheaper and What Gets Costlier

Category	Items	GST Before	GST After	Price Trend
Cheaper Items	Ghee, Butter, Paneer	12%	5%	↓
	Packaged Foods (snacks, sauces)	18%	12%	↓
	Air Conditioners, Refrigerators	28%	18%	↓
	Bicycles	12%	5%	↓
	Hotel Accommodation (≤ ₹7,500/day)	18%	5%	↓
	Fertilizers	12%	5%	↓
	Renewable Energy Equipment	12%	5%	↓
	Handicrafts and Marble Products	12%	5%	↓
	Medical Supplies & Diagnostic Kits	12%	5%	↓
	Beauty & Wellness Services	18%	5%	↓
Costlier Items	Watches, Designer Bags	28%+cess	40%	↑
	Cigarettes, Tobacco Products	28%+cess	40%	↑
	High-End Cars & Motorcycles	28%+cess	40%	↑
	Alcoholic Beverages	28%+cess	40%	↑
	Private Healthcare	12%	18%	↑
	Private Education	12%	18%	↑
	Air Travel	5-12%	18%	↑
	Private Security Services	12%	18%	↑
	Jewelry & Precious Metals	3-5%	12-18%	↑
	Luxury Real Estate	5%	18%	↑

The revised GST regime reflects the government’s push to rationalize taxes and stimulate certain sectors, but experts caution that consumers must remain alert to price shifts in both essential and non-essential goods. For many households, the benefits will be tangible in daily essentials, but luxury goods and certain services are set to see noticeable increases.