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GST Reforms for a New Generation

Lighter on the Pocket, Brighter for the Future

 

Introduction

The Goods and Services Tax (GST) reforms introduced in September 2025 represent a landmark step in reshaping India’s taxation system to better serve the aspirations of its youth. By simplifying tax structures, reducing rates across key industries, and addressing long-standing anomalies, these reforms are designed to create an enabling environment for entrepreneurship, job creation, and affordable living. Sectors with high youth participation—such as education, automobiles, technology, handicrafts, footwear, healthcare, food processing, and textiles —have been prioritized to lower costs, boost competitiveness, and encourage innovation. Beyond reducing the financial burden on households and businesses, the reforms strengthen India’s vision of inclusive growth, sustainability, and empowerment of the next generation.

 

GST Reforms for Promoting Jobs, Businesses and Startups

 

The government has introduced a simplified GST structure with significant rate reductions across key sectors of trade and commerce. Essential industries such as leather, footwear, paper, textiles, handicrafts, toys, packaging, and logistics have been covered under this reform. The aim is to boost the present businesses and startups and incentivise the youth to enter into businesses and initiate startups. 

By lowering GST slabs to 5% on several goods and rationalising rates in transport and allied sectors, the reforms aim to reduce costs for consumers, ease compliance for traders, and enhance competitiveness for Indian businesses.

 

 

GST Rationalisation for Leather and Footwear Industry

 

The leather and footwear sector is a key employer, directly benefitting the youth, in India, with a strong export base. GST rationalisation here reduces the burden on young manufacturers and makes products more accessible to the consumers.

• GST has been reduced from 12% to 5% on chamois leather, composition leather with a basis of leather or leather fibre, and leather prepared after tanning or crusting.
• Footwear priced up to ₹2500 per pair now attracts just 5% GST, directly benefiting young consumers.
• GST on supply of job work in relation to hides, skins, and leather (falling under chapter 41) also cut from 12% to 5%, reducing MSME production costs, encouraging young entrepreneurs.

GST Rationalisation for Wood Industry

Agro-based and eco-friendly wood substitutes see lower taxation, encouraging sustainable manufacturing and MSME competitiveness.

• GST reduced from 12% to 5% on rice husk board, glassfibre reinforced gypsum board, cement bonded particle board, jute particle board, bagasse board, sisal fibre board, etc.
• Sheets for veneering, bamboo flooring, casks, barrels, vats, tubs of wood are also included.
• The aim is to support MSMEs in wood manufacturing and promote eco-friendly alternatives.

GST Rationalisation for Handicrafts Industry

The handicrafts sector, vital for young artisans and exporters, benefits from tax rationalization, making traditional goods more affordable and globally competitive.

• GST cut from 12% to 5% on idols made of wood, stone, and metals.
• GST reduction also applies to paintings, drawings, original engravings, handcrafted candles, carved wood products, handbags including pouches and purses, stone art ware, stone inlay work, tableware and kitchenware of clay & terracotta.
• It further covers glass statutes, artware of iron, aluminium, brass/copper, etc.
• These reforms strengthen India’s cultural economy and young artisanal livelihoods.

 

GST Rationalisation for Textile Industry

The GST rationalisation in textiles removes structural anomalies, reduces costs, boosts demand, supports exports, and sustains jobs.

 

• GST on man-made fibres (MMF) reduced from 18% to 5%.
• GST on man-made yarns cut from 12% to 5%.
• GST on ready-made apparel up to ₹2,500 per piece (earlier limit was ₹1,000) is set at 5%.

The rate cut will make Indian MMF-based garments more price-competitive in global markets, supporting India’s ambition to become a global textile hub. It will support the budding and young exporters.

GST on carpets and other floor covering has also been reduced from 12% to 5%.

GST Rationalisation for Reducing Packaging Costs

The GST on Packing paper, cases, cartons, boxes (of corrugated paper or non-corrugated paper or paper boards) and paper pulp moulded trays has been reduced to 5%. This rationalisation will:

• Reduce the overall logistics and packaging costs, serving the dual purpose of making products cheaper for the customers and production cheaper for businesses.
• Provide relief to youth businesses and small manufacturers that are dependent on cost-effective packaging solutions.

 

GST Rationalisation for Reducing Transportation and Logistics Cost

GST on Commercial Goods Vehicles (Trucks, Delivery Vans, etc.) has been reduced from 28% to 18%. Trucks form the backbone of India’s supply chain, carrying nearly 65%–70% of goods traffic. Lower GST will reduce the capital cost of trucks, which will directly decrease freight rates per tonne-km, especially benefitting India’s young entrepreneurs.

Additionally, the reduction of GST on third-party insurance of goods carriages (from 12% to 5% with ITC) further complements these efforts.

GST Reforms for Promoting Healthcare

While healthcare services by doctors, hospitals, and diagnostic centres remain exempt from GST, the reduction in taxes on essential medicines and medical devices has brought down treatment costs for patients. At the same time, higher taxes on harmful goods like tobacco and related goods underline the government’s focus on preventive healthcare and tackling lifestyle diseases such as cancer. This balanced approach ensures that the tax system itself becomes a tool for protecting youth health and strengthening families’ well-being.

GST Rationalisation for Drugs and Medicines

GST on drugs and medicines has been reduced from 12% to 5%/Nil. It will cut the costs of various essential medicines, easing the financial burden on patients. This move will:

• • Boost the affordability of long-term treatments for chronic illnesses.
  • Strengthen India’s role as the “Pharmacy of the World”, especially for generics, while ensuring domestic affordability.

Further, GST on supply of job work in relation to manufacture of pharmaceutical products will also be reduced from 12% to 5%.

GST Rationalisation for Vision Correction Products

GST on Vision Correction Products has been reduced from 12% to 5%.  Spectacles are not a luxury but a health necessity. The GST rate cut will help in increasing affordability and adoption of spectacles. Lower GST makes vision correction affordable for many people, especially students, the elderly, and low-income households. It will also improve productivity among the youth.

 

GST Rationalisation for Child Care Products

GST on napkins and napkin liners for babies, and feeding bottles has been reduced from 12% to 5%. GST on thermometers have been reduced from 18% to 5%. GST on UHT Milk has been reduced from 5% to Nil.

The GST reforms also reduce the tax burden on other essential childcare products, including baby diapers, nipples, and related items.

The lower cost of these products eases the economic pressure on young families, improves affordability of infant essentials, and supports early childhood health by promoting better hygiene and infection prevention.

GST Exemption on Individual Health Insurance

This will make premiums cheaper for youth and middle-class families and encourage wider adoption of health insurance, reducing out-of-pocket medical expenses.

GST Increase on Tobacco and Related Products

GST on tobacco and related products has been increased from 28% to 40%. These include:

• Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
• Other manufactured tobacco and manufactured tobacco substitutes;
• “Homogenized” or “reconstituted” tobacco; tobacco extracts and essences.
• Products containing tobacco or reconstituted tobacco and intended for inhalation without combustion.
• Products containing tobacco or nicotine substitutes and intended for inhalation without combustion.

 

GST Reforms for Promoting Education

Education, nutrition, care, and play form the foundation of every child’s development. The recent GST rationalisation measures are a path-breaking step towards making learning, mobility, and childcare more affordable for families across India.

GST Exemption on Formal Education

School and university education continues to remain fully exempted from GST. Extension of benefits now covers essential learning materials and childcare products, making education and upbringing more affordable for Indian households and raising well the future youth of our country.

GST Rationalisation on Learning Materials

GST on pencils, sharpeners, crayons, exercise books, graph books, maps, and charts has been reduced from 12% to Nil. GST on erasers has been reduced from 5% to Nil. This reduction will make basic learning tools cheaper, especially for government schools, children and youth in rural areas. It reduces out-of-pocket education expenses for families, encourages higher school enrolment, and supports better learning outcomes. At the same time, it boosts demand for domestic stationery manufacturing, particularly among MSMEs.

GST Rationalisation for Toys and Sports Products

The toy industry, important for child development and MSME manufacturing, benefits from reduced GST.

• GST on toys and sports goods cut from 12% to 5%.
• This makes toys more affordable, encouraging early childhood learning through play.
• This will also “Vocal for Local” initiative by supporting domestic and youth MSME toy makers.

 

GST Reduction on Bicycles – Affordable Mobility for Students

GST on bicycles reduced from 12% to 5%. This will make bicycles more affordable and will help children in rural and semi-urban areas access schools more easily. It further encourages mobility and reduces dropouts, particularly among girls. Additionally, it promotes fitness, outdoor activity, and healthier lifestyles among children.

GST Reforms for Promoting Ease of Living

By lowering GST rates on daily food items, construction materials, gyms/fitness centres, and automobiles, the Government has not only reduced the financial burden on households but also advanced its long-term vision of promoting healthier lifestyles, affordable housing and transportation, and improved ease of living among the youth.

GST Rationalisation for Everyday Food Items

The government has aimed to enhance food affordability by bringing most food items under the 5% or NIL tax slab, as seen in the exemption of staple Indian breads like Paratha, Parotta, and Roti from GST, reflecting their status as essential household foods.

 

 

Reduction of GST on food items to 5% or NIL benefits not only consumers but also the youth involved in the food processing value chain — from farmers and cooperatives to MSMEs, retailers, and exporters.

• GST rationalisation will provide a boost to India’s food processing industries, milk cooperatives, and private dairies, by reducing input costs and boosting production volumes. This will further encourage the youth to initiate business ventures in this industry.
• This move will also encourage demand in semi-urban and rural areas, supporting MSMEs and regional brands being operated by or employing the youth.

 

GST Rationalisation for Gyms/Fitness Centres

GST on gyms/fitness centres has been reduced from 18% to 5%. The reduction of GST on fitness centres marks a decisive step towards building a healthier and more active India. Fitness, which was earlier considered a luxury by many, is now being made accessible to wider sections of society. This aligns with the broader public health agenda of preventive care and wellness promotion, especially among the youth.

Key Benefits:

• The reduced GST makes gyms and fitness memberships more affordable, encouraging more people, especially youth and middle-class families, to access structured health and wellness services.
• This measure complements national preventive health initiatives such as the Fit India Movement, which encourages citizens to prioritise regular exercise and lifestyle changes to prevent chronic illnesses.
• Urban employees and students who rely on gyms for regular exercise will benefit from lower costs, enabling them to balance fitness with busy lifestyles.
• By making fitness centres more accessible, the government is encouraging a societal shift from curative healthcare to preventive health, ultimately reducing long-term health expenditure for families.

 

GST Rationalisation for Two Wheelers (Bikes up to and including 350cc)

GST on two-wheelers (Bikes up to and including 350cc) has been reduced from 28% to 18%. Two-wheelers are more than just vehicles, they are a lifeline of mobility for millions of Indians, especially the youth in rural and semi-urban areas. The reduction in GST brings meaningful relief to lower-middle-class households, young professionals, and gig workers who depend on affordable transport for their livelihood and daily needs.

Key Benefits:

• With lower GST, the overall price of two-wheelers decreases, making them more affordable for the youth, students, and first-time buyers, especially belonging to the lower-middle-class households.
• In small towns and villages, bikes are often the primary mode of transport. Cheaper bikes will enhance accessibility and improve daily commuting options.
• Delivery agents, ride-hailing service providers, and other gig workers rely heavily on two-wheelers. Lower GST reduces their purchase costs, EMIs, and maintenance burden, increasing their monthly savings.
• By reducing commuting costs, this reform helps workers save more, improves mobility for job opportunities, and strengthens the overall workforce efficiency.
• Affordable transport empowers youth to seek education, employment, and entrepreneurship opportunities without being held back by mobility challenges.

 

GST Rationalisation for Small Cars

GST on small cars has been reduced from 28% to 18%. Small cars form the backbone of India’s automobile market, especially in tier-2 and tier-3 cities. By lowering GST on this segment, the government is directly addressing the aspirations of the youth and the middle-class families, while also giving a significant boost to the automobile industry.

Key Benefits:

• The reduction in GST makes small cars more affordable, encouraging youth and first-time buyers to invest in personal mobility solutions.
• Compact cars are most popular in semi-urban and rural markets. Lower GST will accelerate sales in these regions, strengthening the auto industry’s rural footprint.
• Higher car sales will benefit not just manufacturers but also dealerships, service centres, drivers, and auto-finance companies, creating a positive ripple effect across the economy.
• Affordable small cars expand mobility options for young professionals, working parents, and students, making daily commuting easier and more reliable.

 

GST Rationalisation for Large Cars

GST on large cars has been rationalised to flat 40% (no cess). The simplification of GST for larger cars creates predictability in pricing and encourages aspirational young buyers to invest in new vehicles.

GST Rationalisation for Buses

GST on Buses (with seating capacity 10+ persons) has been reduced from 28% to 18%. Public and shared transport will see significant gains with reduced GST on buses and minibuses.

• Reduces upfront costs for fleet operators, schools, cooperates, tour operators and state transport undertakings. This will spur demand for buses and minibuses.
• Makes fares more affordable, especially for the youth in rural and semi-urban routes.
• Encourages shift to public transport, easing congestion and pollution.

 

GST Rationalisation for Cement

GST on cement has been reduced from 28% to 18%.  Cement constitutes one of the largest input costs in construction, contributing 15–20% of total building costs and nearly 11% of overall construction expenses.

• The reduction in GST will substantially lower overall construction costs, making housing and infrastructure projects more affordable.
• Lower cement prices will directly benefit construction of houses under the Pradhan Mantri Awas Yojana (Urban and Grameen) and other public infrastructure initiatives.
• The cement industry is highly employment-intensive, spanning mining, logistics, manufacturing, and distribution. Increased demand due to lower prices will boost job creation for the youth across cement plants, ancillary industries, and logistics.

 

GST Rationalisation for Marble and Granite Blocks

GST on marble and granite blocks have been reduced from 12% to 5%. India has a large natural stone sector, with states like Rajasthan, Gujarat, Karnataka, and Andhra Pradesh being major producers.

• Reduced GST will lower the costs of flooring, tiling, and interior finishing, directly benefiting young homebuyers and infrastructure projects.
• The GST cut will boost domestic competitiveness while reducing reliance on imported natural stones.
• The marble and granite industry provides employment to lakhs of workers, especially the youth, and the tax relief will help sustain jobs in extraction, processing, and related activities.

 

GST Rationalisation for Job Work for Manufacture of Bricks

GST on job work for bricks cut from 12% to 5%, easing rural housing costs and supporting MSME running brick kilns.

GST Reforms for Promoting Drone Technology

Drones have emerged as transformative tools across sectors like agriculture, defense, disaster management, and infrastructure development. Recognizing their potential among the tech-savy youth, the Indian government is intensifying efforts to integrate drone technology into national development strategies. Working along the same lines, the GST on unmanned aircrafts (drones) has been significantly reduced from the earlier 18% / 28% to a uniform 5% rate. This rationalization aims to encourage wider adoption of drones across sectors while also boosting domestic manufacturing under the Make in India and Atmanirbhar Bharat initiatives.

The uniform 5% GST rate on all drones, regardless of specifications, ensures parity and removes classification disputes, providing clarity and long-term stability to the industry. This policy aligns with the Production Linked Incentive (PLI) Scheme and is expected to unlock wide-ranging sectoral applications in agriculture, petroleum, mining, infrastructure, logistics, defence, and emergency response. Beyond sectoral growth, it will also drive economic benefits by generating new employment opportunities for the youth in manufacturing, software development, field operations, and maintenance.

Conclusion

The 2025 GST reforms mark a transformative chapter in India’s journey toward inclusive economic growth and youth empowerment. By rationalising rates across diverse industries, the government has not only eased the cost of living but also fostered new opportunities for startups, MSMEs, and job seekers. The reduction in taxation for essential goods, services, and emerging technologies underscores a forward-looking approach that combines affordability with competitiveness. These measures will stimulate domestic manufacturing, support traditional industries, and encourage innovation, while also improving public health, education, and mobility. Collectively, the reforms reaffirm India’s commitment to making taxation simpler, fairer, and more growth-oriented - ensuring that young citizens are at the heart of the nation’s economic future.

References

Ministry of Housing and Urban Affairs

Ministry of Civil Aviation

Ministry of Road, Transport and Highways

Ministry of Rural Development

Ministry of Commerce and Industry

Ministry of Textiles

Ministry of Food Processing Industries

Ministry of Youth Affairs and Sports

Ministry of Education

Ministry of Finance

Ministry of Health and Family Welfare

Ministry of Women and Child Development

Ministry of Heavy Industries

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