Your Next Salon, Gym, Or Yoga Session Will Cost Less Under GST 2.0: Here's Why

Products such as hair oil, toilet soap bars, shampoos, toothbrushes and toothpaste will now fall under the 5 per cent GST bracket, compared to the earlier 12 to 18 per cent.

The reforms underscore the government’s push to simplify the GST structure and provide relief to households amid rising costs.

Source : Freepik

The GST Council has announced a major reduction in tax rates on a range of everyday services and consumer products, a move aimed at making personal care and wellness more affordable for the public.

Effective from September 22, beauty and fitness-related services such as salons, gyms, yoga centres, barbers and health clubs will attract a reduced Goods and Services Tax (GST) of 5 per cent, down from the current 18 per cent with Input Tax Credit (ITC). However, the new 5 per cent rate comes without ITC.

Relief for Consumers in Daily Personal Care

In addition to services, several commonly used household and hygiene items are set to see lower price tags. Products such as hair oil, toilet soap bars, shampoos, toothbrushes and toothpaste will now fall under the 5 per cent GST bracket, compared to the earlier 12 to 18 per cent. Other items, including talcum powder, face powder, shaving cream and aftershave lotion have also been shifted to the lower tax rate.

The finance ministry clarified that while toilet soaps now attract the reduced rate, liquid soaps will continue to be taxed at 18 per cent. Addressing questions over whether the changes will mainly benefit multinational and premium brands, the ministry said that these products are consumed across all income groups. Simplifying the tax framework was also cited as a key consideration, with the ministry stressing that differentiating taxes by brand or price point would add unnecessary complexity to the system.

Objective of Rate Rationalisation

The rate rationalisation, agreed upon at the 56th meeting of the GST Council, is designed to cut household expenditure for lower and middle-income segments. Officials emphasised that the changes are not targeted at luxury consumption, but rather at broadening the affordability of essential daily-use goods.

The Council’s FAQs further explained that oral hygiene products such as toothpaste, toothbrushes and dental floss have been included in the 5 per cent slab, while mouthwash remains taxed at a higher rate.

Rajat Mohan, Senior Partner at AMRG & Associates, highlighted the broader implications of the move. He noted, “By including health clubs, salons, barbers, fitness centres, and yoga under this concessional bracket of 5 per cent, the government has attempted to reposition personal care and wellness as accessible essentials rather than luxuries. From a consumer's perspective, this should bring down costs and expand access to wellness services.”

Concerns Over Input Tax Credit Removal

However, industry experts caution that the benefit to customers may not be straightforward. Mohan explained that since the revised 5 per cent rate is without ITC, service providers may find it challenging to absorb input costs such as rent, consultation fees, consumables and infrastructure. “This could neutralise part of the consumer benefit, as providers may still embed these costs into their pricing structures,” he said.

The finance ministry described the reform as part of a broader simplification drive, calling it a ‘reset’ for the GST system. Yet, Mohan noted that the effectiveness of these cuts depends heavily on whether service providers pass on the savings to end-users. With the Anti-Profiteering Authority no longer operational, ensuring that reductions in GST actually translate into lower bills for consumers may prove difficult.

A Step Towards Simplification

The reforms underscore the government’s push to simplify the GST structure and provide relief to households amid rising costs. Whether this new approach delivers tangible consumer savings remains to be seen, but for now, visits to salons, fitness centres and other wellness spaces are expected to become lighter on the wallet.

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