Introduction

As you prepare to light up your home this Diwali, the Indian government has introduced a GST overhaul to brighten your budget. The Diwali Bonanza is going into effect on September 22, 2025, just in time for the festival of Navratri. It is meant to reduce the cost of necessary items you purchase regularly and lessen the financial burden on you and your family, saving more money in your hands in this festive season. This blog article will explain how these changes will affect your budget, from groceries to insurance, and why this is a system of change for your financial plan.

Open Demat Account and Start Trading!

A More Convenient GST Structure

Fewer tax slabs

The government has changed the GST system from four slabs (5%, 12%, 18%, 28%) to two slabs (5% and 18% for products other than essential). The 12% and 28% slabs are gone, making your bills more straightforward to read and simplifying business reporting. There is a special 40% tax slab on 'sin' goods like tobacco and pan masala. Luxury goods like yachts, large cars and motorcycles over 350cc will also have a 40% tax slab. The current compensation cess will still be payable for tobacco products until the state loan is repaid, so there is no tax increase.

Addressing the inverted duty structure

This outcome addresses the inverted duty structure, a longstanding issue where input taxes exceeded output taxes, leading to a significant pile-up of credits. Streamlining the rates helps the domestic manufacturing industry and leads to more equitable pricing for you, whether for groceries or consumer durables.

Cheaper essentials to support your festive shopping

Grocery Bills Just Got Cheaper

Your weekly grocery run just got a little cheaper. Many essentials, such as butter, ghee, cheese and condensed milk, have been taxed at 5% GST, rather than 12%. Pre-packaged paneer and UHT milk have dropped to a nil rate (i.e., tax-free) for your recipes. Dried fruits, nuts, jams, jellies, and sugar confectionery, halved at 12-18% are now down to 5%, allowing you to stock up on sweets for Diwali without genuine concern. Baked goods like biscuits, pastries and corn flakes are also down to 5%, in addition to staples like pasta, noodles and soups.

Savings on Personal Care & Household Items

After food, personal care products such as hair oil, shampoos, soaps, toothbrushes, and talcum powder drop from 18% to 5%. Wool and household products like kitchen items, tableware, and baby diapers will also fall to 5%. So, if you are a household, it should help the budget. If you are a rural household, tools, tyres, farm machinery, and tractors will also fall to 5%. These are all the farm needs.

Savings on Improvements

If you plan to improve your home, all white goods under the new tax regime for GST will drop from 28% to 18%. This means that for items like air conditioners, fridges, dishwashers, washing machines and large televisions, there is a 10% savings, which may equal thousands of dollars. Small cars with petrol under 1,200cc or diesel under 1,500cc, and all two-wheeled vehicles under 350cc, will now fall to 18% from the previous 29% - this may be enough to allow you to see a new purchase more easily. All parts for automobile repairs and small tractors will unify at 18%, making repairs much easier. Handicrafts, marbles or even educational equipment like pencils and maps will drop to 5% - this will abundantly enhance your cultural ambitions and academic enrichment.

A Few Hikes to Note

Not everything gets cheaper. The price of garments over Rs 2,500 per piece rises to 18% from 12%, and carbonated drinks hit the 40% slab, nudging you toward healthier options.

Significant Relief on Insurance Premiums

One of the biggest wins is the GST exemption on individual health and life insurance premiums, previously taxed at 18%. Whether term plans, ULIPs, or senior citizens, it would save as much as 18% on premiums. For example, the ₹30,000 health policy would now save ₹5,400 annually.

(Please note- group policies remain taxable).

As with re-insurance and life-saving cancer drugs, you are exempt, so you should be secure when required. In these uncertain times, this provides you with an escape from spending on financial protection and instead gives you peace of mind that you have protected your family and their future without incurring any taxes.

Economic Stimulus and Your Financial Plan

Stimulating Growth

This latest GST reform is expected to boost GDP growth by 20-30 basis points and lower inflation by 65-75 in FY26. The fiscal cost, which is pegged to ₹48,000 crore, may be offset by festive sales momentum and an uptick in tax compliance. The fiscal impact is expected to cost around Rs 48,000 crore, but can be offset by spirited festive sales lifts and improved compliance.  For you, it means you are entering the festive season with more money to spend, enjoy or invest.

Plan Wisely

With lower costs and reduced spending on essentials and durables, you can divert funds into an investment plan that allows you to invest in more things, such as the equity markets or mutual funds, for the long-term saving potential. As a savvy investor, now that this Diwali Bonanza has released capital savings in your home, think about how it will allow you to build a varied portfolio, so you meet your financial development objectives.

A Bright Diwali

This GST Diwali Bonanza will change how you shop and plan financially by making essentials and insurance affordable. Enjoy a brighter, budget-conscious festive season with these changes to how you shop. Your wallet and your Diwali will shine a little brighter.

Read More - What is GST Invoice | GST in Stock Broking | Types of GST | GST in Detail | What is UGST