New GST Rates Announced: Essential Food, Medicines, and Education Items Exempted

The Goods and Services Tax (GST) Council, headed by Union Finance Minister Nirmala Sitharaman, approved major reforms in India’s indirect tax structure during its 56th meeting held on September 3, 2025. Marking one of the most comprehensive changes since GST’s introduction in 2017, the new regime—dubbed GST 2.0—will come into effect from September 22, 2025.

This reform introduces a simplified two-slab system of 5% and 18%, addressing long-standing issues of inverted duty structures, classification challenges, and compliance burdens.

One of the most significant changes is the complete removal of GST on personal health and life insurance policies, a move aimed at making essential financial protection affordable for households.

Finance Minister Nirmala Sitharaman called the reform “a structural change” designed to enhance ease of living, business confidence, and tax predictability across sectors.

Major Highlights of GST 2.0

GST Slabs Reduced to Two

The GST Council decided to rationalize the slabs to 5% and 18%, simplifying taxation for businesses and consumers alike.

Key Goods and Services Now Under Zero Tax

GST on Essential Food Items

• Ultra-High Temperature (UHT) Milk – GST reduced from 5% to Nil

• Pre-packaged and labelled Chena or Paneer – from 5% to Nil

• Pizza Bread – from 5% to Nil

• Indian Breads such as Khakhra, Chapathi, and Roti – from 5% to Nil

• Paratha, Parotta, and other Indian breads (any name) – from 18% to Nil

Impact: This move will directly benefit households, restaurants, and food processing businesses by lowering costs.

GST on Life-Saving Medicines and Healthcare Items

• Agalsidase Beta, Imiglucerase, Eptacog alfa (activated recombinant coagulation factor VIIa) – from 5% to Nil

• 33 other critical drugs and medicines – from 12% to Nil

• Personal health and life insurance policies – fully exempt from GST

Impact: A huge relief for patients with rare diseases and those dependent on expensive imported medicines. Families will also find insurance more affordable.

GST on Education-Related Items

• Erasers – from 5% to Nil

• Uncoated paper/paperboard for notebooks – from 12% to Nil

• Exercise books, graph books, laboratory notebooks – from 12% to Nil

• Pencil sharpeners – from 12% to Nil

• Pencils, crayons, pastels, writing and drawing chalk, tailor’s chalk – from 12% to Nil

Impact: A major boost for students, parents, and educational institutions as the cost of basic stationery is expected to fall sharply.

GST on Printed Educational & Reference Materials

• Maps, Atlases, Wall Maps, Topographical Plans, and Globes (printed) – from 12% to Nil

Impact: Encourages wider access to knowledge resources and reduces educational costs.

Finance Minister’s Statement

Union Finance Minister Nirmala Sitharaman emphasized that the reforms are not limited to rate cuts.

“It’s also on structural reforms and for ease of living. We have corrected the inverted duty structure problems. We have resolved classification-related issues, and we have ensured that there is stability and predictability about the GST.”

She further highlighted that the decisions were made unanimously with no disagreements from states, reflecting a strong consensus on reforms.

Conclusion 

The GST 2.0 reforms mark a turning point in India’s indirect taxation system, aiming to simplify compliance, lower costs, and support everyday households. By reducing the number of slabs to just 5% and 18%, the government has streamlined the GST regime while addressing long-standing structural inefficiencies.

The complete removal of GST on personal health and life insurance, essential food items, and educational supplies ensures that reforms will have a direct impact on the lives of millions. In particular, patients depending on life-saving medicines and students in need of affordable learning materials stand to gain substantially.

The reforms also show the government’s commitment to predictability and stability in taxation. With all states unanimously supporting these measures, GST 2.0 could usher in a new phase of growth, consumer relief, and business confidence. As India moves forward, the emphasis remains on ease of living and inclusive development.