A Festive Relief Package
The central government has presented what it calls a “Diwali gift” for citizens by approving one of the most extensive changes in Goods and Services Tax (GST) since its launch in 2017. In the 56th GST Council meeting chaired by Finance Minister Nirmala Sitharaman, new rates were approved that will directly affect common households, students, farmers, and small businesses.
The reforms simplify the overall tax structure and lower rates on a wide range of goods and services. According to the government, the changes will be effective from September 22, 2025, aligning with the start of the Navaratri festival.
Simplified GST Structure
Until now, India’s GST regime had multiple slabs ranging from 0% to 28%, which created confusion for both consumers and traders. The Council has now decided to merge and simplify these into two broad rates: 5% and 18%. Luxury goods will continue to attract higher rates, but for most everyday items, the system is being streamlined.
This step is being marketed not just as festive cheer but also as a long-term move towards transparency and ease of business.
Cheaper Daily Essentials
One of the biggest takeaways from the announcement is the reduction in tax on household items. Products like toothpaste, soap, hair oil, shampoo, shaving cream, and toothbrushes will now fall under the 5% slab, down from the earlier 18%.
This change is expected to directly benefit middle-class families, lowering their monthly expenses. Retailers also believe that lower taxes could push demand for personal care products, boosting sales across the sector.
Healthcare and Insurance Relief
Another major reform is in the healthcare segment. Life insurance and health insurance premiums are now fully exempt from GST. This makes policies more affordable, especially for individuals and families who rely on private health cover.
In addition, several medical products such as glucometers, diagnostic kits, thermometers, oxygen equipment, and spectacles will now attract only 5% GST instead of the higher 12–18% bracket. The government says this will make healthcare more accessible and reduce out-of-pocket spending.
Support for Farmers and Agriculture
The agriculture sector has also received significant relief. Tractor parts, farm machinery, bio-pesticides, micronutrients, and similar inputs have seen their tax rate drop to 5%.
Farmers’ groups have long argued that high GST on agricultural tools increased costs of production. This reduction is likely to bring some relief, especially at a time when input costs for seeds, fertilizers, and equipment have been rising.
Education Materials Now Tax-Free
For students and parents, the GST Council has scrapped taxes on several learning materials. Items such as exercise books, maps, pencils, crayons, erasers, and charts will now be completely exempt from GST.
This move is expected to lower education costs, particularly for school-going children. Publishers and stationery makers will also benefit from increased demand as prices become more affordable.
Lower Rates for Automobiles and Transport
The automobile industry also received a festive boost. Taxes on small hybrid cars, three-wheelers, motorcycles up to 350 cc, and light transport vehicles have been reduced from 28% to 18%.
For consumers, this translates into cheaper vehicle prices, while for manufacturers it could stimulate higher sales volumes. Electric vehicles will continue to be taxed at just 5%, a clear sign of continued government support for cleaner mobility.
Appliances and Consumer Goods Get Cheaper
Many middle-class households will feel the relief in big-ticket purchases as well. Items like air conditioners, televisions, washing machines, projectors, monitors, and dishwashers will now attract 18% GST instead of the steep 28%.
Industry experts say this move can revive demand in the consumer durables market, which had been slowing due to high costs and inflation.
Why the Government Calls It a “Diwali Gift”
The announcement has been carefully timed. With festive shopping season approaching, the government wants to boost consumer sentiment and give relief to families feeling the pinch of inflation.
Leaders have described these reforms as a “historic step” that will make everyday living more affordable. Prominent voices from industry, including business leaders, have also hailed it as a “big Diwali gift for the common man.”
Broader Economic Impact
Beyond immediate consumer benefits, economists point out that these cuts could increase demand in multiple sectors—FMCG, automotive, education, and healthcare. Higher consumption during the festive season can boost production and job creation.
However, there is also the question of revenue. Lower GST collection in the short term could widen fiscal pressure, though the government hopes higher demand will make up for the gap.
Final Thoughts
The government’s “Diwali gift” GST reforms are set to bring real relief across households, farms, schools, and industries. By slashing rates on essentials, healthcare, education materials, and consumer durables, the changes are expected to reduce everyday costs and lift festive mood.
Whether these benefits sustain in the long term will depend on how businesses pass on the savings and how the economy responds. But for now, families across the country are preparing to welcome this festive season with some extra savings in their pockets.
