The 56th GST Council meeting in September 2025 brought the most transformative reform yet, known as GST 2.0. This reform consolidated GST slabs into 0%, 5%, 18%, and 40%. Essentials like milk, paneer, books, and medicines remain at 0%, while luxury and sin goods have been moved to 40%. The 5% GST slab, also called the Merit Rate, is particularly important because it covers daily-use consumer goods and affordable services. This ensures that commonly consumed products remain within reach of the masses without over-expanding the 0% category.
In this blog, we provide the updated list of 5% GST items in India after the GST 2.0 reforms, along with details of goods, services, and sectors that now benefit from this lower tax rate.
Why 5% GST called the Merit Rate
The Merit Rate ensures that:
- Daily essentials (like edible oils, sugar, packaged foods) remain affordable.
- Healthcare & education-adjacent products (like medicines, diagnostic kits, spectacles) are priced lower.
- Small businesses and farmers benefit from cheaper machinery and inputs.
- Consumers pay less tax overall compared to the previous 12% or 18% rates.
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Goods Under the 5% Slab After GST Reforms
The 5% GST rate applies to a broad set of food items, healthcare products, agricultural equipment, apparel, and household goods.
1. Food, Dairy, and Packaged Essentials
The government rationalized food products, especially packaged items, to 5% to support affordability.
| Product/Item | Previous GST Rate | New GST Rate (Sept 2025) |
| Coal, Edible Oils, Tea, and Domestic LPG | Varies | 5% |
| Dairy Products (Butter, Ghee, Cheese, Spreads) | 12% | 5% |
| Packaged Foods (Namkeen, biscuits, pasta, cornflakes, cereals) | 12% / 18% | 5% |
| Jams, Sauces, Pickles, Soups | 12% / 18% | 5% |
| Dry Fruits & Nuts (Almonds, Pistachios, Brazil Nuts) | 12% | 5% |
| Fortified Rice Kernel (FRK) | 18% | 5% |
| Fruit Juices & Processed Fruits | 12% | 5% |
| Sugar Confectionery, Extruded Snacks | Varies | 5% |
| Packaged Tender Coconut Water | 12% | 5% |
| Millet Flour blended with Atta (≥70% millet, packaged) | Varies | 5% |
Impact: Household grocery bills become lighter with many processed and packaged foods now at 5% instead of 12–18%.
Also Read: New GST Rates on Daily Essentials
2. Healthcare, Medical Equipment, and Personal Care
| Product/Item | Previous GST Rate | New GST Rate (Sept 2025) |
| Hair oil, shampoo, toothpaste, toilet soap, shaving cream | 18% | 5% |
| Common Medicines (non-life-saving) | 12% | 5% |
| Diagnostic Kits & Reagents | 12% / 18% | 5% |
| Surgical Instruments, Thermometers | 18% | 5% |
| Corrective Spectacles & Goggles | 28% / 12% | 5% |
| Essential Medical Gases (Oxygen) | 12% | 5% |
| Glucometers & Test Strips | 12% | 5% |
| Medical Dressings, Gauze, Bandages | Varies | 5% |
Impact: Healthcare affordability improves, while life-saving drugs are 0%, general medicines and personal hygiene items are reduced to 5%.
Also Read: Impact of New GST Rates on Healthcare
3. Agriculture, Machinery, and Renewable Energy
| Product/Item | Previous GST Rate | New GST Rate (Sept 2025) |
| Fertilizers & Agricultural Machinery | 12% / 18% | 5% |
| Tractors (excluding semi-trailers) | 12% | 5% |
| Tractor Tyres & Tubes | 18% | 5% |
| Drip Irrigation Systems & Sprinklers | 12% | 5% |
| Bio-pesticides & Micro-nutrients | 12% | 5% |
| Renewable Energy Devices (solar cookers, windmills, bio-gas plants) | 12% | 5% |
| Fuel Cell & Hydrogen Vehicles | Varies | 5% |
Impact: Lower farming input costs and cheaper green technology adoption support agriculture and renewable energy growth.
Also Read: New GST Rates on Renewable Energy Products
4. Apparel, Footwear, and Textiles
| Product/Item | Previous GST Rate | New GST Rate (Sept 2025) |
| Apparel ≤ ₹2,500 per piece | 12% | 5% |
| Footwear ≤ ₹2,500 per pair | 12% | 5% |
| Quilted Textiles & Made-up Items (≤ ₹2,500) | 5% / 12% | 5% |
| Imitation Zari Threads/Yarn | 12% | 5% |
| Bidi Wrapper Leaves (Tendu), Indian Katha | 18% | 5% |
Impact: Affordable clothing and footwear prices fall, helping low and middle-income households.
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5. Miscellaneous Goods
| Product/Item | Previous GST Rate | New GST Rate (Sept 2025) |
| Umbrellas | 12% | 5% |
| Traditional Indian Toys (wooden, textile, metal) | Varies | 5% |
| Drones (unmanned aircraft) | 18% / 28% | 5% |
| Milk Cans (iron, steel, aluminium) | 12% | 5% |
Impact: GST rationalization helps Indian toy manufacturers and small-scale industries.
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5% GST Services List
Services are equally important in the 5% slab, particularly transport, hospitality, and job work.
1. Accommodation and Personal Services
- Hotels: tariff between ₹1,000–₹7,500/day
- Salons, gyms, yoga centers, and wellness services
- Admission to cinema halls (ticket ≤ ₹100)
- Common effluent treatment and biomedical waste disposal services
2. Transport and Logistics
- Transport of goods by rail (non-Indian Railways): 5% (no ITC)
- Renting goods carriages with operator (fuel included): 5% (restricted ITC)
- Multimodal goods transport within India: 5%
- Third-party insurance of goods carriages
3. Job Work Services
| Job Work Category | Previous GST Rate | New GST Rate (Sept 2025) |
| Umbrellas, pharma products, leather, printed goods | 12% | 5% |
| Tailoring services | Varies | 5% |
| Job work for food, textiles, bricks, handicrafts, and cleaning services | Varies | 5% |
Impact: Job workers in MSME sectors benefit from lower tax rates, reducing costs for manufacturers.
Suggested Read: 0% GST Item List 2025 and 12% GST Item List 2025
Why the 5% GST Slab Matters
The 5% Merit Rate helps India achieve:
- Affordability: packaged foods, personal care, and medicines now cost less.
- Support for farmers & MSMEs: lower costs for tractors, irrigation, and job work.
- Green economy boost: cheaper renewable energy equipment.
- Simpler compliance: fewer slabs mean fewer classification disputes.
Conclusion
The 5% GST slab (Merit Rate) plays a balancing role in India’s GST 2.0 reforms. By moving essential but non-core goods into this slab, the government ensures that affordability is preserved while still generating revenue.
Consumers save on daily grocery, healthcare, and clothing bills. Farmers and industries benefit from cheaper inputs and machinery. Services like hotels, salons, and transport also become more affordable.
Looking ahead, the GST Council may continue refining this list as part of its mission to maintain simplicity and fairness in taxation.
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