India’s GST Council Announces Historic Tax Reforms Slashing Rates on Personal Care and Essentials

India’s GST Council Announces Historic Tax Reforms Slashing Rates on Personal Care and Essentials

In a landmark decision hailed as a "historic Diwali gift" by Finance Minister Nirmala Sitharaman, India’s Goods and Services Tax (GST) Council has announced sweeping tax reforms that significantly reduce GST rates on beauty, wellness services, and daily personal care essentials. These reforms, effective September 22, 2025, promise to make essential products and services more affordable, especially benefiting middle and lower-income households across the country.

A Major Tax Break for Personal Care Services

At the heart of these reforms is a drastic reduction in GST on beauty and wellness services, including salons, barbers, fitness centers, gyms, yoga studios, and health clubs. The GST rate for these services has been slashed from 18 percent with Input Tax Credit (ITC) to a concessional 5 percent without ITC. This 13 percentage point cut is expected to ease the financial burden on consumers seeking personal care and wellness services, repositioning these offerings as accessible essentials rather than luxuries.

“This shift underscores the government’s commitment to promoting wellness and health among all sections of society,” noted tax experts, highlighting the positive impact such a move could have on daily life and the service sector.

Reduced Taxes on Daily Essentials

Along with services, a wide range of personal care products have also been brought under the reduced 5 percent GST bracket. Hair oils, toilet soap bars, shampoos, toothbrushes, toothpaste, talcum powder, face powders, shaving creams, and aftershave lotions will now attract lower taxes, replacing previous rates that ranged from 12 to 18 percent.

While liquid soaps and mouthwashes continue to attract higher taxes, essential hygiene products have been made more affordable, supporting better health and hygiene practices among consumers nationwide.

Structural Overhaul of the GST System

The GST Council’s reforms go beyond mere rate cuts; they represent the most significant restructuring of India’s indirect tax system since GST’s introduction in 2017. The Council has rationalized GST slabs from four to just two primary categories: 5 percent and 18 percent, with a special 40 percent rate reserved for luxury and sin goods.

Though these changes are projected to cause a revenue loss of around Rs 477 billion, the move aims to stimulate consumption, especially ahead of the festive season, by lightening the monthly expenditure burden on middle and lower-income groups.

Prime Minister Narendra Modi expressed satisfaction at the unanimous support for the reforms, emphasizing their role in improving citizens’ lives and facilitating easier business operations for small traders and service providers.

Caution from Industry Experts

Industry experts have noted that while the tax rate reductions are welcomed, the removal of Input Tax Credit for service providers under the lower rate bracket may limit the full extent of price reductions passed to consumers. Service providers might need to absorb some input costs, potentially affecting the final consumer impact.

Conclusion

India’s GST Council’s bold tax restructuring marks a significant step toward a more equitable tax system, with an encouraging focus on health, wellness, and daily essentials. These changes hold promise for consumers, particularly those in the middle and lower-income segments, by making personal care services and products more accessible and affordable as the nation heads into the festive season.

This reform is poised to not only boost consumer spending but also foster inclusive growth, reflecting the government’s broader economic vision for 2025 and beyond. Citizens and businesses alike can look forward to enjoying the benefits of a streamlined, simplified, and fairer indirect tax framework.