GST 2.0 kicks in: How much money will Indian households save?

Starting today (September 22), India will witness a “GST Savings Festival,” as sweeping reforms in the tax structure come into effect, providing the middle-class and the poor with a spending boost. Notably, the revamped Goods and Services Tax (GST) regime coincides with the first day of the nine-day festival of Navratri.

Earlier, on Sunday, hailing the sweeping reforms, Prime Minister Narendra Modi said, “From sunrise on September 22, a new chapter in India’s tax regime will begin. From tomorrow, you will be able to buy your favourite items with ease. This is like a GST saving festival for every Indian.”

He further added that the implementation of GST 2.0 will help people save Rs 2.5 lakh crore. Here’s how.

What changes under GST 2.0?

Earlier, the Goods and Services Tax (GST) structure was divided into four slabs — five per cent, 12 per cent, 18 per cent and 28 per cent. However, this caused much confusion in the classification of goods.

But now, the GST slabs have been simplified; there are only two slabs — five per cent for essentials and daily-use goods such as food grains, medicines, basic dairy items and educational products, and 18 per cent for most standard goods and services, including manufacturing, transport and consumer services.

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The Modi Sarkar has also introduced one additional slab: a 40 per cent rate for sin and luxury goods such as tobacco, pan masala, aerated drinks, premium vehicles, gambling, casinos, online gaming, and race clubs.

What items get cheaper?

Following the introduction of GST 2.0, as many as 375 items, including automobiles, electronics, equipment, kitchen staples and medicines, are set to get cheaper for you from today (September 22).

Some essentials such as milk, chapati, paratha, and parotta will be tax-free. Meanwhile, products like butter, ghee, paneer and cheese will move to five per cent. Also, packaged foods like pasta, biscuits, chocolates, cornflakes, namkeens and bhujia will also be taxed at five per cent.

Almonds, cashews, pistachios and dates, which were earlier taxed at 12 per cent, will also attract a five per cent GST now, making these items cheaper. Refined sugar and confectionery will also move to the five per cent bracket. Ice creams, which saw their GST also being cut to five per cent from 18 per cent, are also set to be significantly cheaper. Other items to be added to the five per cent slab are: hair oil, shampoos, toothpaste and dental floss.

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Life-saving drugs, medical devices, and books will either be tax-free or taxed at five per cent. Meanwhile, electronics such as washing machines, dishwashers and televisions shift from 28 per cent to 18 per cent. Notably, medical devices such as diagnostic kits and glucometres will come down to five per cent.

Fertilisers, seeds, crop inputs and construction materials will move from 12 per cent to five per cent.

Small cars (under 1,200cc petrol or 1,500cc diesel) now attract 18 per cent GST instead of 28 per cent, with the earlier cess completely scrapped.

Hotel rooms priced under Rs 7,500 will now attract five per cent instead of 12 per cent and travel will also become cheaper as economy air tickets will also be taxed at five per cent.

In the beauty and physical well-being services, GST has also been slashed for barbers, fitness centres, health clubs, salons, and yoga to five per cent instead of the previous 18 per cent.

What gets more expensive?

However, not all items are set get cheaper. Luxury and sin goods such as cigarettes, gutkha, zarda, pan masala and aerated waters with added sugar will now be taxed at 40 per cent. Large bikes and luxury cars will also attract 40 per cent GST.

⚠️ Attention: These items will fall under the new 40% #GST slab (Luxury/Sin Goods)

🔸Cigarettes, pan masala, gutkha
🔸Sugary and aerated drinks
🔸Luxury Cars (above engine capacity thresholds)
🔸Motorcycles (above 350cc)#NextGenGST #GSTReforms

(3/3) pic.twitter.com/LMVPIL8c1r

— PIB India (@PIB_India) September 21, 2025

Activities such as visiting the casino, horse racing, lottery, and IPL tickets will also come under the 40 per cent bracket.

Notably, clothes priced above Rs 2,500 will also attract a higher GST rate of 18 per cent compared to 12 per cent before.

How much savings will you see under GST 2.0?

As many items get cheaper, middle-class Indians and the poor are set to see a rise in their savings.

As several daily household items have been moved to the five per cent slab and staples like roti, paneer, khakra, and basic groceries will be fully exempted from GST, experts predict that most households will see savings of Rs 3,000 and more annually on essentials.

Families will also save money when it comes to insurances and medical expenses. GST on life and health insurances have been abolished. Previously taxed at 18 per cent, policies will cost significantly less.

Business Today reports that one shall make a saving of Rs 3,600 on health insurance premiums of Rs 20,000 and term life policies cost Rs 10,000 will result in a saving of Rs 1,800. This amounts to a savings of Rs 5,400 on insurance.

Indians will also see savings of Rs 2,000-Rs 10,000 on the purchase of electronic household appliances, depending on the item bought. For instance, the tax of refrigerators, ACs, large TVs — has been cut from 28 per cent to 18 per cent. That’s a solid seven-eight per cent off on one’s purchase.

An Indian Express report reveals that buying a Whirpool AC of one tonne will get cheaper by Rs 4,500 to Rs 5,250. Similarly, a Whirpool dishwasher will become cheaper by Rs 3,200 to Rs 4,300.

Perhaps, the biggest savings will be seen in vehicular purchases. For instance, small cars, under 1,200cc petrol or 1,500cc diesel now attract a GST of 18 per cent, down from 28 per cent plus a cess earlier. This means a car such as the Maruti Alto K10 will be cheaper by Rs 1,07,600.

Even for a Rs 5 lakh car, the direct GST cut can shave off ₹40,000–₹50,000. Road tax and insurance premiums — which are calculated on ex-showroom prices — also fall, adding Rs 6,000–Rs 7,000 in extra savings, reported Business Today.

It is left to be seen just how much of a dhamaka the GST 2.0 reforms will bring in, but for now, it is expected to boost consumption amid the festive season.

With inputs from agencies