A common man’s dream comes true.. And the nation seems to have gotten its ‘Diwali gift’ with the GST council recently announcing a sweeping tax reform.
Our Honourable Finance Minister, Smt. Nirmala Sitharaman declared GST latest updates with a simplified two-slab structure (5% and18%), lower rates on daily essentials, cheaper education supplies, reduced healthcare costs, slashed slabs on farm equipment and automobiles and relief for MSMEs, effective 22 September 2025.
A ray of hope means betterment of everyday living, affordability and economic growth. But what are these tax reliefs? What is cheaper and what gets costlier? We break it down for not just the community, but for companies.
Take a deep dive to see how the changes in GST reforms 2025 affect essentials to enterprises.
Next-Gen GST Reforms 2025 Explained: Two Slabs, One Vision Driving Affordability and Growth
The Goods and Services Tax (GST) was an indirect taxation reform introduced in India on 1st July 2017. The historic and landmark taxation policy combined central and state taxes into a single, unified system – enhancing transparency and reducing the cascading of taxes.
Eight years later, in the 56th meeting of the GST Council, Union Finance Minister Smt. Nirmala Sitharaman notified us about the ‘Next-Gen GST reforms’, with focus on improving the lives of the common man, women, youth, and middle-class families and ensuring ease of doing business for all, including small traders and businessmen, farmers, MSMEs – while strengthening India’s long-term growth.
7 Pillars of Next-Gen GST Reforms: New GST Rule Proposed by the Ministry of Finance
The latest changes in GST extend GST’s success, but also simplify it with a 2-tier, fairer taxation structure with ease of digital filing and convenient returns. They prioritize consumers and empower MSMEs and manufacturers with smoother cash flows, strengthen state revenues and boost demand driving consumption and manufacturing growth across India.
| Pillar | Focus Area | Focus Area |
|---|---|---|
| 1. One Nation, One Tax | Strengthening GST’s foundation |
– Expanded taxpayer base
– Unified tax system across India
|
| 2. Simpler Two-Tier System | Rate rationalisation |
– New 2-slab structure: 5% & 18%
– Fairer, transparent taxation
|
| 3. Smoother Duty and Refunds | Ease of compliance |
– Corrected inverted duty structures
– Faster refund processing
|
| 4. Tech-Enabled Filing | Digital-first compliance |
– Easy registration for small/low-risk businesses
– 90% upfront provisional refunds for exportersg
– E-invoicing and AI-driven risk detection
|
| 5. Consumers First | Relief for households |
– Essentials placed in 0-5% bracket
– Faster refund processing
|
| 6. Empowering MSMEs and Manufacturing | Boosting local growth |
– Fixed inverted duty structures
– Simpler rates to promote Make in India
|
| 7. Stronger States, Stronger Bharat | Sustainable revenue model |
– Rationalised rates to spur demand
– Wider tax base ensures stronger state revenues
|
What are the GST Latest Updates? Earlier vs New, Next-Gen GST Rates Highlighted Below
As mentioned above, 5% and 18% will be the only applicable tax slabs, with sharp cuts on the following:
- Household essentials (soaps, toothpaste, Indian breads) to 5% or Nil boosting affordability
- Life-saving drugs, medicines reduced from 12% to Nil or 5% making healthcare accessible and affordable
- Two-wheelers, small cars, TVs, ACs, cement cut from 28% to 18% bringing relief to middle-class.
- Farm machinery, irrigation equipment cut from 12% to 5%, reducing farming costs
However, luxury and sin goods, such as tobacco, cigarettes, pan masala and aerated drinks will now be taxed at 40%.
A complete overview of what’s cheaper and how this proves to be a welcome change:
1. Daily Essentials: Lighter on Every Household’s Pocket
| Item | Earlier GST | New GST | Impact |
|---|---|---|---|
| Hair Oil, Shampoo, Toothpaste, Toilet Soap, Shaving Cream | 18% | 5% | Lesser grocery bills |
| Butter, Ghee, Cheese & Dairy Spreads | 12% | 5% | Affordable dairy |
| Pre-packed Namkeens, Bhujia & Mixtures | 12% | 5% | Cheaper indulgence |
| Utensils | 12% | 5% | Everyday kitchenware within reach |
| Feeding Bottles, Nappies for Babies & Child Diapers | 12% | 5% | Relief for young parents |
| Sewing Machines & Parts | 12% | 5% | Boost for households and small tailors |
2. Farmers and Agriculture: Boosting Bharat’s Backbone
| Item | Earlier GST | New GST | Impact |
|---|---|---|---|
| Tractor Tyres & Parts | 18% | 5% | Lower input costs |
| Tractors | 12% | 5% | Affordable mechanisation |
| Pre-packed Namkeens, Bhujia & Mixtures | 12% | 5% | Cheaper farm inputs |
| Drip Irrigation System & Sprinklers | 12% | 5% | Promoting water efficiency |
| Parts for Horticultural/Forestry Machinery (soil prep, harvesting, threshing) | 12% | 5% | Cheaper cultivation and harvesting |
3. Healthcare: Relief When It Matters Most
| Item | Earlier GST | New GST | Impact |
|---|---|---|---|
| Individual Health & Life Insurance | 18% | Nil | Wider insurance coverage |
| Thermometers | 18% | 5% | Affordable diagnostics |
| Medical Grade Oxygen | 12% | 5% | Critical care relief |
| Diagnostic Kits & Reagents | 12% | 5% | Cheaper lab testing |
| Glucometer & Test Strips | 12% | 5% | Support for diabetics |
| Corrective Spectacles | 12% | 5% | Vision care affordability |
4. Automobiles: Fueling Affordability
| Item | Earlier GST | New GST | Impact |
|---|---|---|---|
| Petrol, Petrol Hybrid, LPG, CNG Cars (≤1200cc & ≤4000mm) | 28% | 18% | Affordable family cars |
| Diesel & Diesel Hybrid Cars (≤1500cc & ≤4000mm) | 28% | 18% | Cheaper mobility |
| 3-Wheel Vehicles (for transport of goods) | 28% | 18% | Relief for transport sector |
| Motor Cycles (≥350 cc) | 28% | 18% | Affordable premium bikes |
| Motor Vehicles for transport of goods | 12% | 5% | Lower logistics costs |
5. Education: Affordable for All
| Item | Earlier GST | New GST | Impact |
|---|---|---|---|
| Maps, Charts & Globes | 12% | Nil | Affordable learning |
| Pencils, Sharpeners, Crayons & Pastels | 12% | Nil | Relief for parents |
| Exercise Books & Notebooks | 12% | Nil | School essentials cheaper |
| Erasers | 5% | Nil | Basic stationery free of tax |
6. Electronics: Smarter, Cheaper Homes
| Item | Earlier GST | New GST | Impact |
|---|---|---|---|
| Air Conditioners | 28% | 18% | Cooler homes, lower costs |
| Televisions (≤32 inch incl. LED & LCD) | 28% | 18% | Affordable smart entertainment |
| Monitors & Projectors | 28% | 18% | Lower digital learning costs |
| Washing Machines | 28% | 18% | Everyday affordability |
Along with rate cuts, the government has shared the following procedural reforms:
| Reform Area | Recent Amendments in GST Introduced |
|---|---|
| Registration | Automatic registration within 3 working days based on risk profiling. |
| Refunds | Provisional refunds sanctioned by proper officer via system-based evaluation. |
| Ease for Small Businesses | Who defined? Entities with turnover ≤ ₹2.5 lakh/month can opt-in. |
| Correction | Relief for supplies with inverted duty structure. |
Now that we know how the overall GST tax revision India will benefit the common man, economists foresee a potential boost of 100–120 basis points in GDP growth in the upcoming 4–6 quarters.
What does this mean for business? We know Indian manufacturers stand to gain from the giant GST reset. How?
Potential Impact of GST Reforms on Indian Businesses
But how will recent amendments in GST impact different industry’s business? Let us find out!
Automobiles
Major beneficiaries of the latest changes in GST will be two-wheeler companies (≤ 350 cc), car manufacturers (≤ 1,200 cc), and tractors, who will enjoy reduced GST from 28% to 18%. Indian companies like Mahindra, Maruti Suzuki may benefit significantly whole high-end car and bike makers will feel slight pinch.
Pharma and Healthcare
The GST new updates usher a decisive win for patients and the pharma industry alike. For the healthcare sector, the 5% slab and key exemptions bring long-awaited clarity, paving the way for transparent pricing and smarter market strategies. The reform widens healthcare access in semi-urban and rural India, reduces litigation, and frees resources for R&D. Most importantly, it reflects a people-first approach to taxation, ensuring life-saving drugs remain within reach.
Manufacturing
Common use item manufacturers, from hair oil to ice creams and TVs are rejoiced. Aspirational good manufacturers, like AC and washing machines foresee a rise in demand. Food and beverages suppliers ranging from butter and ghee to dry nuts, condensed milk, cheese, figs, dates, avocados, citrus fruits, meat/ sausages, sugar, namkeen jam and fruit jellies, coconut water, drinking water packed in 20-litre bottles, fruit pulp or fruit juice, beverages containing milk, ice cream, biscuits, pastry, corn flakes and cereals, and sugar confectionery predict enhanced sales.
Consumer goods such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see a rate cut from 12% to 5%. The same on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil has been cut from 18% to 5% – meaning the businesses in the sector are sure to witness a surge in demand.
Textiles
The textile sector has lauded the revised GST rates India across the fiber-to-garment value chain, especially the hike in the 5% duty threshold from ₹1,000 to ₹2,500 per garment. However, few enterprises remain concerned that garments priced above ₹2,500 still attract 18% GST.
Construction and Real Estate
Real estate companies hope that with the GST cut on construction material like steel and cement, costs will come down, which in turn will make housing affordable and boost sales.
Beverage Industry Feels the Heat of GST Hike
The GST Council has raised taxes on carbonated, caffeinated, and energy drinks to 40%, up from 28%, placing them firmly in the “sin goods” bracket. While the move ensures uniformity and reduces classification disputes, it will squeeze beverage companies dependent on aerated drinks. In contrast, coffee has been brought down to just 5%, and bottled drinking water (20L) now attracts only 5%, offering relief to households and institutions. Overall, the sector faces mixed fortunes, with aerated drinks bearing the brunt of the reform.
While the impact is now known, what matters is, how will businesses keep up with the increased demand and changes in GST filing? The big question is –
Latest changes in GST in India: A Diwali Gift for Citizens, a Compliance Challenge for Businesses?
While rate rationalisation eases the tax burden, accurate and timely compliance, especially under evolving rules, remains a challenge.
This is where SAP Business One, enhanced with Indian localisations and GST-ready add-ons, becomes indispensable for businesses aiming to stay compliant and agile.
How SAP Business One Empowers GST Compliance
| Feature | What It Does | Why It Matters |
|---|---|---|
| Built-in GST, TDS & TCS Logic | Automatically handles Indian tax regimens like CGST, SGST, IGST, UTGST, cess, reverse charges, TDS/TCS, and e-invoicing |
Reduces manual errors and ensures statutory accuracy
|
| E-Invoicing and ANX-1 Support | Enables auto-generation of e-invoices, IRN capture via ClearTax/IRP, and export of GST ANX-1 reports in ready-to-upload JSON format |
Speeds up filing, reduces entry errors, keeps you audit-ready
|
| Automated E-Way Bill Management | Generates, validates, and exports e-way bill JSONs, with status tracking inside ERP system |
Ensures smooth logistics compliance and avoids transport disruptions
|
| Tax Code and Document Automation | Streamlined tax code determination, default SAC entries, GSTIN-enabled warehouse setup, and subdocument numbering for GST invoices, credit/debit memos |
Eliminates confusion in filing and ensures traceability
|
| Seamless Reporting for Audits | Generates CSV and GEP (Electronic Filing) reports automatically for GST returns and statutory compliance |
Makes monthly/quarterly filings less tedious and audit-ready
|
| Scalable, India-Localised ERP | Modular, cost-efficient, and GST-TDS-TCS compliant, tailored for Indian SMEs and MSMEs |
Ensures ERP grows with business demands, not disrupts them
|
SAP Business One not only helps businesses align with India’s transformed GST framework, but ensures that compliance is seamless, audits are easier, and operations stay efficient.
Early adopters of SAP Business One, combined with GST add-ons can:
- Convert compliance from a burden to a business advantage.
- Ensure architecture-ready filing: ANX-1, e-way bills, e-invoices with less effort.
- Build resiliency for future reforms and multistate operations.
- Localization as per Indian GST new updates,
We bring you Series 4 of our Uneecops SAP Business One video series: “GST Returns Made Easy with SAP Business One”
- Automated reports
- Prescribed formats (Excel/CSV → JSON ready)
- Faster, error-free uploads
- Enhanced compliance with ease
As India simplifies GST, Uneecops ensures your compliance journey is just as simplified.
Watch the full episode now and see how GST filing becomes effortless with SAP Business One.
GST 2.0 – A Move That Aligns with Aatmanirbhar Bharat by Strengthening Domestic Production Demand, Bolstering Ease of Doing Business and Shifting Consumer Preference Toward Locally available, Affordable Alternatives
As we know how overall business owners can reap benefits of GST reforms, we also understand how the move is a nudge from the government for MSMEs and domestic manufacturers to participate more actively in the formal economy. How? The 40% “de-merit” slab on luxury/sin goods discourages high-end imports (like SUVs, luxury items, aerated drinks), indirectly pushing demand toward local substitutes.
Read More:- Revolutionize the Way Your Taxes are Done in Real Time
With Trump back in office (2025), we know, global trade is again shifting toward protectionism. US tariffs on Chinese and potentially other exports create uncertainty for Indian exporters. So, GST 2.0 is both an economic simplifier and a shield against external shocks like Trump’s tariffs. Maybe this is India’s way of saying – if the world closes doors, our domestic demand and self-reliance will keep us afloat.
Whatever, Indian businesses are poised to thrive with next-gen GST reforms + next-gen compliance with SAP Business One, as discussed above.
