Invest Guide October 2025

This Diwali, the sparkle isn’t just in the diyas - it’s in your shopping cart too! -

The 56th GST Council meeting on September 3, 2025, chaired by Finance Minister Nirmala Sitharaman, has lit up India’s economic landscape with reforms as dazzling as the festive fireworks. A long-pending wish has finally come true, the maze of multiple GST slabs has given way to a simpler, fairer system with just two shining stars - 18% as the Standard Rate and 5% as the Merit Rate, plus a 40% de-merit rate for a few indulgences.

Like the perfect Diwali gift, this bold step promises lighter compliance burdens for businesses, brighter savings for consumers, and a smooth, transparent journey towards Viksit Bharat 2047.

With the new GST rates coming into effect on September 22, homes glow with vibrant rangolis, twinkling diyas, and joyful celebrations, while India’s tax regime too embraces a fresh new sparkle - making this festive season shine even brighter with prosperity, cheer, and boundless possibilities.

It all sounds like a festive bonanza - but the big questions remain: What’s really changed? How will it brighten your monthly budget? And why are businesses bursting with joy like Diwali crackers? From taxes to takeaways, this article simplifies GST 2.0 and shows how it touches both your budget and India’s future.

Here’s a quick snapshot of GST 2.0!

Save Big on Daily Essentials

• From 18% to 5%
  Hair Oil, Shampoo, Toothpaste, Toilet Soap Bar, Tooth Brushes, Shaving Cream.
• From 12% to 5%
  Butter, Ghee, Cheese & Dairy Spreads, Pre-packaged Namkeens, Bhujia & Mixtures, Utensils, Feeding Bottles, Napkins for Babies & Clinical Diapers, Sewing Machines & Parts.

Uplifting Farmers & Agriculture

• From 18% to 5%
  Tractor Tyres & Parts.
• From 12% to 5%
  Tractors, Specified Bio-Pesticides, Micro-Nutrients, Drip Irrigation System & Sprinklers, Agricultural, Horticultural or Forestry Machines for Soil Preparation, Cultivation, Harvesting & Threshing

Relief in Healthcare Sector

• 18% (No change)
  Individual Health & Life Insurance.
• From 18% to 5%
  Thermometer.
• From 12% to 5%
  Medical Grade Oxygen, All Diagnostic Kits & Reagents, Glucometer & Test Strips, Corrective Spectacles.

Automobiles Made Affordable

• From 28% to 18%
  Automobiles Made Affordable, Diesel & Diesel Hybrid Cars (1500cc & 4000mm), 3 Wheeled Vehicles, Motor Cycles (350cc), Motor Vehicles for transport of goods.

Affordable Education

• 18% (No change)
  Maps, Charts & Globes, Pencils, Sharpeners, Crayons & Pastels, Exercise Books & Notebooks.
• 5% (No change)
  Eraser.

Affordable Education

• 18% (No change)
  Maps, Charts & Globes, Pencils, Sharpeners, Crayons & Pastels, Exercise Books & Notebooks.
• 5% (No change)
  Eraser.

Save on Electronic Appliances

• From 2% to 18%
  Air Conditioners, Television (above 32”, LED & LCD), Monitors & Projectors, Dish Washing Machines

Will GST Rate Cuts Boost Growth? Winners, Losers, and the Road Ahead

• Will the cuts boost growth?
  In the near term, yes. By reducing prices on mass-consumption goods and select durables, the reform is expected to raise disposable incomes and stimulate consumption through FY26. It also streamlines compliance with a simpler structure - two slabs of 5% and 18%, plus a 40% de-merit rate - effective September 22, 2025 (Press Information Bureau).
• Markets’ initial response
  Equity indices moved higher on September 8, reflecting optimism around the GST cuts alongside global rate-cut expectations.
• Inflation outlook
  Headline inflation may see a temporary easing as prices of everyday goods and services decline, aligning with the government’s stated focus on affordability and demand support (Press Information Bureau).
• Sectoral Winners Under GST Reset
  From cheaper soaps, shampoos, and packaged foods to reduced GST on TVs, ACs, and two-wheelers, the cuts touch both homes and highways. Cement, tractors, textiles, hotels, gyms, and even health insurance get relief, while life-saving drugs turn tax-free - making GST 2.0 a true across-the-board bonanza!

Sectors Feeling the Pinch -

• Sin & Luxury Goods
  Tobacco, pan masala, aerated drinks, high-end cars, yachts, and private aircraft are hit with a steep 40% de-merit rate. Cigarettes and related products continue to attract an additional cess until legacy borrowings are cleared (PIB).
• MSME Job-Work Players
  Several small manufacturers argue that keeping job-work under 18% GST strains their cash flows and have urged for a lower 5% rate. Industry bodies, such as CODISSIA, have raised these concerns.
• Revenue-Dependent States
  Smaller states remain wary of near-term revenue losses from rate cuts, with states like Mizoram voicing apprehensions.

Full GST Exemption on Life and Health Insurance Policies: A Mixed Blessing?

The GST Council has exempted individual life and health insurance premiums from the 18% GST, effective September 22, 2025, making insurance more affordable. Policyholders will save on premiums - for example, a Rs. 15,000 health policy previously costing Rs. 17,700 will now cost Rs. 15,000. This benefits middle-class families and senior citizens by reducing financial burden.

Industry Perspective -

From cheaper soaps, shampoos, and packaged foods to reduced GST on TVs, ACs, and two-wheelers, the cuts touch both homes and highways. Cement, tractors, textiles, hotels, gyms, and even health insurance get relief, while life-saving drugs turn tax-free, making GST 2.0 a true across-the-board bonanza!

Broader Implications -

However, insurers face challenges, including reversing accumulated Input Tax Credit (ITC), which may affect short-term pricing and margins. The move aims to simplify the tax structure and encourage wider adoption of insurance, enhancing financial protection for households. Overall, consumers gain immediate savings, while insurers manage operational adjustments.

The Great Savings Squeeze - GST Reforms and Gen Z's Financial Habits

GST rationalisation and income tax cuts are widely celebrated as measures to boost consumption, make goods cheaper, and increase take-home pay. On the surface, this looks like a win-win: households have more disposable income, businesses see higher sales, and the economy enjoys a growth boost. However, beneath the cheer, there’s a subtler, long-term concern - how these reforms might influence savings habits, particularly among younger generations like Gen Z.

Household Savings Under Pressure -

Recent data from the Reserve Bank of India (RBI) shows household financial liabilities climbing to 6.1% of Gross National Disposable Income (GNDI) in 2023–24, while net financial savings hover around just 5.1%. Meanwhile, credit card balances surged from Rs. 2.53 lakh crore to Rs. 2.92 lakh crore in a single year. The pattern is particularly noticeable among Gen Z, who increasingly borrow for lifestyle upgrades, gadgets, dining, and travel rather than investments or asset creation.

The Compounding Consequence: Time, Discipline, and the True Cost of Postponed Saving

The mathematics of compound interest highlights the cost of delayed saving. For instance, investing Rs. 2 lakh annually from age 25 could grow to nearly Rs. 5 crore by age 60 at a 10% annual return. Begin the same habit ten years later, at 35, and the corpus shrinks to around Rs. 1.8 crore. Even a short delay can drastically reduce retirement wealth. Conversely, spending without a savings plan can leave individuals financially exposed, with little cushion for emergencies or retirement.

Conclusion

GST reforms and tax cuts have the potential to empower households, but they also come with a subtle risk: encouraging short-term consumption at the expense of long-term wealth creation. For Gen Z and younger Indians, the key challenge is balancing the immediate financial relief with the need to build a strong, disciplined savings habit- ensuring today’s gains translate into tomorrow’s financial security.