The 56th meeting of the Goods and Services Tax (GST) Council on Tuesday approved sweeping reforms to India’s indirect tax system, marking one of the most significant overhauls since GST was rolled out in 2017. The changes aim to simplify tax rates, ease compliance, and spur growth, in line with the government’s vision of making India a developed nation by 2047.
Key Changes in GST Rates
The Council rationalised multiple GST slabs into three main categories:
- 18% standard rate for most goods and services
- 5% merit rate for essentials
- 40% de-merit rate for harmful products
Officials said the move will bring clarity in pricing, reduce disputes, and make it easier for businesses to forecast tax liabilities.
Relief for Households
Several consumer items have been brought under lower tax slabs:
- Soap, shampoo, toothpaste, bicycles, and kitchenware now attract 5% GST.
- UHT milk, paneer, chapati, and paratha are exempted.
- Packaged foods, noodles, chocolates, and beverages have been made cheaper with reduced rates.
- Life and health insurance products are exempt from GST, while essential drugs and cancer treatments are also tax-free, reducing healthcare costs.
Boost for Farmers and Labour-Intensive Sectors
To support agriculture and employment-heavy industries, the Council cut rates on:
- Farm machinery and inputs to 5%
- Fertilisers and chemicals from 18% to 5%
- Handicrafts, marble, granite, and leather goods, helping preserve jobs and promote exports
Correction of Anomalies
The Council also addressed inverted duty structures:
- Man-made fibre and yarn will now attract 5%, improving competitiveness of textiles.
- Cement reduced from 28% to 18%, supporting construction and infrastructure.
- Renewable energy equipment and auto components saw rate cuts to back India’s green growth push.
Institutional Reforms
The government announced that the Goods and Services Tax Appellate Tribunal (GSTAT) will be operational by the end of 2025 to ensure quicker and uniform dispute resolution. Other measures include provisional refunds in inverted duty cases, risk-based compliance checks, and harmonised valuation rules.
Implementation and Industry Response
The reforms will be implemented in a phased manner starting 22 September 2025, ensuring revenue stability while delivering immediate benefits.
Industry groups, including the Confederation of Indian Industry (CII), hailed the reforms as “growth-oriented and responsive”, saying they would boost demand, investment, and job creation.