India witnessed a major tax reform on 22 September 2025 as the New GST Rates came into effect nationwide. The latest GST rate cut is being described as a festive gift from the Modi government. With the revised structure, many essential items have become cheaper, and several goods will now attract zero tax. The changes are expected to benefit households, students, and patients who rely on life-saving medicines.

Historic Shift in GST Structure

From Monday, 22 September, the GST framework in India has undergone a significant transformation. The new GST regime introduces only two primary slabs: 5 percent and 18 percent. Earlier, multiple tax brackets created confusion for businesses and consumers. By streamlining the system, the government aims to simplify taxation and reduce compliance burdens.

Finance experts have called this step historic, as it marks one of the biggest reforms since the implementation of GST in 2017. With fewer slabs and a focus on essential goods, the government intends to stimulate consumption, reduce inflationary pressures, and bring relief to the common man.

Zero Tax on Essential Items

One of the most striking features of the new GST rates is the decision to impose zero tax on specific items. According to the announcement, these goods will now be available without any GST burden. This move is particularly significant before the festival season, offering families considerable savings.

The list of zero tax items includes both daily-use goods and high-cost medicines. Pre-packed paneer, paratha, roti, chhena, and pizza bread are exempt from tax. Students will benefit from exemptions on exercise books, graph books, laboratory notebooks, and even stationery items like rubber and uncoated paper.

A major part of the zero tax bracket covers critical medicines used in the treatment of cancer, genetic disorders, and rare diseases. Life-saving drugs such as Onasemnogene Abeparvovec, Daratumumab, Alectinib, and Imiglucerase are now tax-free, reducing the financial burden on patients and families.

GST Rate Cut and Its Benefits

The Modi government’s decision to cut GST rates has been described as a “Diwali gift” to the people. By exempting essential goods and simplifying slabs, the administration hopes to boost affordability. Businesses, especially in the food and education sectors, will also benefit from reduced tax liability.

Economists suggest that lower tax rates on daily essentials will leave more disposable income in the hands of consumers. This could increase demand and, in turn, stimulate economic growth. For the government, the challenge will be to balance revenue loss with the broader benefits of higher consumption and compliance.

Detailed List of Zero Tax Items

The new GST structure includes a wide variety of goods under the zero-tax category. Items like pre-packed paneer, paratha, roti, chhena, and khakhra are part of the list. UHT milk and other dairy products also fall under zero tax, making them cheaper for consumers.

Educational materials like exercise books, graph books, laboratory notebooks, and uncoated paper have been exempted, bringing relief to students and parents. Rubber and certain types of paperboards are also tax-free, supporting the education sector further.

The biggest relief comes in the healthcare sector. Several expensive drugs for cancer, blood disorders, and rare genetic diseases have been brought under the zero-tax list. Medicines such as Pegylated Liposomal Irinotecan, Mepolizumab, Tecvayli (Teclistamab), Polatuzumab Vedotin, and Velaglucerase Alfa are part of the exemptions. This will help reduce treatment costs significantly for families battling serious illnesses.

Impact on Households

For households, the biggest change is the reduction in costs of essential food items. The exemption of everyday items like roti, paratha, paneer, and pizza bread will directly reduce monthly expenses. UHT milk, widely used in urban areas, will now be more affordable.

Families with school-going children will save money on exercise books, graph books, and other learning materials. The removal of GST from educational items reflects the government’s commitment to making education more affordable.

During festival seasons, the impact will be even more visible as households buy food products in larger quantities. With several of these items exempt from tax, families can enjoy more value for their money.

Relief for Patients

The healthcare sector is one of the biggest beneficiaries of the new GST rates. Life-saving medicines often cost lakhs of rupees, making them unaffordable for many families. By bringing such drugs under the zero-tax list, the government has offered direct financial relief to patients.

Medicines used in cancer treatment, genetic therapy, and rare disease management are now more accessible. This decision has been welcomed by health experts and patient advocacy groups, who had long demanded tax exemptions on critical drugs.

Pharmaceutical companies also see this move as a positive step, as lower costs could increase access and demand. Patients battling life-threatening diseases will find some comfort in knowing that essential medicines are more affordable.

The Two-Slab Structure

The government has reduced the number of GST slabs to only two: 5 percent and 18 percent. All goods and services now fall under these categories, with essential items in the 5 percent bracket and others under 18 percent.

Luxury items and products considered harmful, such as tobacco, remain under the 40 percent tax slab. This shows the government’s intent to balance affordability with higher taxation on non-essential or harmful goods.

Businesses have welcomed the two-slab system, as it reduces complications in tax compliance. With fewer rates to manage, filing returns and maintaining records will become simpler for companies.

Political and Economic Context

The GST rate cut comes at a time when the government is focusing on boosting consumption and addressing inflation concerns. By reducing the burden on essentials, the administration aims to win public support, especially with festivals and elections approaching.

Politically, the decision strengthens the government’s image as one that prioritizes the welfare of the common man. Economically, it helps reduce inflationary pressures and promotes growth in sectors like food, education, and healthcare.

The GST Council meeting, which finalized these changes, was widely anticipated. Experts had predicted that the government would take steps to ease the tax burden, and the announcement confirmed those expectations.

Industry Reactions

The retail sector has welcomed the new GST rates, particularly the exemption on food items. Restaurants, bakeries, and packaged food companies are expected to benefit from reduced costs and higher demand.

The education sector has expressed relief over exemptions on exercise books and stationery. Schools and parents alike see this as a step towards making learning materials affordable.

Healthcare professionals have strongly supported the zero-tax decision on critical medicines. Hospitals and pharmacies expect more patients to access life-saving drugs as costs reduce.

However, some industry voices have expressed concern about revenue losses for the government. Balancing tax exemptions with fiscal needs remains a challenge.

Consumer Sentiment

Consumers across India have reacted positively to the changes. Social media has been filled with messages praising the government for its “Diwali gift.” Many families see the zero-tax exemptions as a direct relief to their budgets.

With reduced prices on daily food items, parents of school-going children and patients requiring expensive medicines, the reforms have touched a wide section of society. The overall sentiment is that the new GST rates will make living costs more manageable.

Challenges Ahead

While the GST reforms bring relief, they also present challenges. The government will face reduced revenue collections due to zero-tax items. It remains to be seen how this will impact fiscal targets.

There is also the challenge of ensuring that businesses pass on the benefits of lower taxes to consumers. Authorities will need to monitor prices and prevent profiteering.

In the healthcare sector, despite tax exemptions, medicines remain costly due to high production costs. Ensuring broader access will require further policy support.

The implementation of the New GST Rates 2025 marks a milestone in India’s taxation history. With only two primary slabs, simplified compliance, and zero-tax on essentials, the reforms aim to make life easier for consumers and businesses.

Households will benefit from cheaper food items and educational materials. Patients will find critical medicines more affordable. Businesses will enjoy reduced compliance burdens.

While revenue concerns remain, the broader benefits of affordability, consumption growth, and public goodwill outweigh the risks. The Modi government’s decision to cut GST rates and exempt essentials has been rightly described as a “Diwali gift” to the nation.