The GST Council on Wednesday cleared a landmark reform to India’s indirect tax system by rationalising rates into two main slabs — 5% and 18% — with the changes set to take effect from September 22. The move is expected to make a wide range of daily-use goods and services cheaper while tightening taxes on sin and luxury products.

Food and essentials: Ultra-high temperature (UHT) milk has been exempted from GST, while items like butter, ghee, paneer, and cheese have been reduced from 12% to 5%. Popular staples such as pasta, cornflakes, biscuits, chocolates, and cocoa products will also now attract just 5%. Dry fruits, nuts, and refined sugar products are among the other items to benefit. Packaged snacks like namkeens, mixtures, and bhujia have shifted from 18% to 5%, while mineral water and aerated waters (without sugar or flavour) have also moved to 5%.

Agriculture and healthcare: Fertilisers and select agricultural inputs have been rationalised to 5%. Essential healthcare items, including life-saving drugs and some medical devices, will see significant relief with rates cut from 12–18% to 5% or nil.

Consumer goods: Footwear and textiles, previously taxed at 12%, now fall under the 5% slab, reducing costs for mass-market buyers. Entry-level appliances will shift from 28% to 18%.

Luxury and sin goods: Pan masala, gutkha, cigarettes, and other tobacco products will remain under high GST plus compensation cess, now calculated on Retail Sale Price (RSP) to improve compliance. A new 40% slab has been created for sin and luxury products, including premium liquor, high-end cars, and sugary aerated drinks.

The GST Council stated that GST 2.0 aims to simplify compliance while ensuring relief on essential goods and maintaining higher taxation on harmful or luxury consumption.