New GST Rates List 2025: ACs, Cars, Insurance, and Mobile Bills May Get Cheaper
In a landmark announcement during his Independence Day speech on August 15, 2025, Prime Minister Narendra Modi unveiled the next generation of Goods and Services Tax (GST) reforms, dubbed "GST 2.0." These reforms promise to simplify India’s tax structure and reduce costs for consumers, potentially making everyday essentials and big-ticket items more affordable. With the GST Council set to finalize these changes in September 2025, here’s a look at the proposed new GST rates for 2025 and how they could impact your wallet.
Proposed GST Rate Structure
The current four-tier GST structure (5%, 12%, 18%, and 28%) is proposed to be streamlined into just two primary slabs: 5% and 18%. Additionally, a special 40% "sin tax" will apply to luxury and demerit goods like tobacco, pan masala, and online gaming. Petroleum products will remain outside the GST framework, and certain items, such as diamonds and precious stones, will continue to be taxed at existing rates. This simplification aims to reduce compliance burdens for businesses and make goods and services more affordable for consumers.
What’s Likely to Get Cheaper?
The proposed GST reforms are expected to lower prices across various sectors, boosting consumption and economic growth. Here are the key items and services that may become more affordable:
1. Air Conditioners (ACs) and Consumer Electronics
- Current GST Rate: 28%
- Proposed GST Rate: 18%
- Impact: Household appliances like ACs, TVs, refrigerators, and washing machines are expected to see significant price reductions. For example, an AC could become Rs 1,500–2,500 cheaper, depending on the model. This shift from the 28% slab to 18% will make consumer electronics more accessible, potentially spurring demand in the electronics sector.
2. Cars and Two-Wheelers
- Current GST Rate: 28% (plus compensation cess of up to 22% for some vehicles)
- Proposed GST Rate: 18%
- Impact: Small petrol and diesel cars (engine <1200cc for petrol, <1500cc for diesel, length <4m) and two-wheelers are likely to move to the 18% slab, potentially reducing prices by 10% or more. Electric vehicles, already taxed at 5%, will remain unaffected, continuing to promote green mobility. The auto industry is optimistic, with projections of 15–20% demand growth for small cars and two-wheelers.
3. Insurance Premiums
- Current GST Rate: 18%
- Proposed GST Rate: 5% or potentially 0%
- Impact: A reduction in GST on life and health insurance premiums could significantly lower the cost of financial protection. For instance, a Rs 20,000 annual motor insurance premium could drop by nearly Rs 2,600 if taxed at 5%. However, industry experts note that the final impact depends on how input tax credits are handled, as insurers may need to adjust base premiums if credits are limited.
4. Mobile and Broadband Bills
- Current GST Rate: 18%
- Proposed GST Rate: 5% (as proposed by the telecom industry)
- Impact: The telecom sector is pushing for a reduction in GST on mobile and broadband bills to 5%, which could lower monthly expenses for millions of consumers. This move would make digital services more affordable, supporting India’s digital economy and increasing access to connectivity.
5. Daily Essentials and Packaged Foods
- Current GST Rate: 12% or 18%
- Proposed GST Rate: 5%
- Impact: Everyday items like toothpaste, soaps, packaged foods (e.g., namkeen, ketchup, noodles), and household goods (e.g., pressure cookers, bicycles) are expected to shift to the 5% slab. This could reduce household expenses, particularly for middle-class and rural consumers, boosting consumption of fast-moving consumer goods (FMCG).
Economic and Consumer Benefits
The GST 2.0 reforms are designed to achieve multiple goals:
- Boost Consumption: Lower taxes on essentials and aspirational goods like cars and electronics are expected to increase disposable income, encouraging spending, especially ahead of the festive season.
- Simplify Compliance: A two-slab structure will reduce classification disputes and ease compliance for businesses, particularly MSMEs.
- Support Economic Growth: Analysts predict a marginal GDP boost of around 0.3% due to increased consumer spending, though the reforms may not fully offset external challenges like U.S. tariffs.
- Reduce Logistics Costs: A simplified tax structure is expected to lower logistics costs by 2–3%, benefiting manufacturing and e-commerce sectors.
However, states have raised concerns about potential revenue losses, estimated at up to Rs 9,000 crore annually, though the government expects increased consumption and compliance to offset this impact over time.
Challenges and Considerations
While the reforms promise significant benefits, there are challenges to address:
- Revenue Impact: The initial revenue loss from rate cuts could be substantial, with estimates ranging from Rs 50,000 crore to Rs 1.74 lakh crore. The government anticipates this will be offset by higher consumption and economic activity.
- Input Tax Credit (ITC) Concerns: For sectors like insurance, the benefits of lower GST rates may be limited if input tax credits are restricted, potentially leading to higher base premiums.
- Implementation Timeline: The GST Council’s approval is critical, and changes to systems and policy terms may delay implementation. Consumers are advised not to delay purchases, especially for long-term products like insurance.
What’s Next?
The GST Council is expected to meet in September 2025 to finalize these proposals, with implementation targeted for Diwali 2025. Finance Minister Nirmala Sitharaman will present the Centre’s vision to the Group of Ministers (GoM) to ensure alignment with state interests. If approved, these reforms could mark the most significant tax overhaul since GST’s inception in 2017, offering relief to consumers and businesses alike.
Conclusion
The proposed GST reforms for 2025 are set to make ACs, cars, insurance, mobile bills, and daily essentials more affordable, delivering a "double Diwali gift" to Indian consumers. By simplifying the tax structure and reducing rates, the government aims to boost consumption, ease compliance, and drive economic growth. While challenges like revenue loss and ITC adjustments remain, the potential for lower prices and increased affordability is a promising step toward a more consumer-friendly tax system. Stay tuned for updates from the GST Council’s upcoming meeting, and prepare for potential savings this festive season!
Disclaimer: The information in this blog is based on proposed GST reforms as of August 2025. Final rates and implementation details are subject to GST Council decisions. Consult official government notifications for the latest updates.
