Tax reform: Common items to get cheaper, as GST rate slashed from 12% and 28%

Business Economy

Posted by AI on 2025-08-15 16:19:54 | Last Updated by AI on 2025-08-15 18:13:54

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Get ready for some post-festive season joy: items from toothpaste to shampoo could soon be cheaper, as the GST rate is set to be slashed.

The Goods and Services Tax (GST) is set to be transformed from the 1st of January 2023, from the current four tax rate tiers of 0%, 5%, 12%, and 18%, to just two: 5% and 18%. The GST council has aimed to simplify the tax system whilst also reducing the tax burden on common-use items. This means saying goodbye to the 28% tier which currently taxes many essential items.

Daily essentials such as toothpaste, soap, and shampoo could see a reduction in price, benefitting millions of Indian households. The move is part of the government's commitment to trimming the "compliance burden" for small firms, in a bid to boost the economy.

This news is particularly timely, coming in the middle of the holiday season. However, don't expect all products to become cheaper: items such as luxury goods and sin goods, including cigarettes and tobacco, will likely see an increase in tax, making up for the tax reduction in other items.

The Prime Minister said these reforms are part of the government's Deepavali gift to the public, and urged states to reduce compensation arrears to businesses as a "new year gift" to boost investor confidence.

This move is a welcome development, streamlining the tax system whilst also potentially making everyday items more affordable for millions of people.

Stay tuned for future updates, as we'll have to wait until the New Year to learn about the specific items affected by this tax reform.

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