Lawgics dated 04.09.2025 by Adv. Nidhi Agarwal
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The 56th Meeting of the GST Council was held on 3rd September 2025 in New Delhi under the chairpersonship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. This meeting marks a landmark step in simplifying India’s GST system and providing relief to the common man, farmers, small businesses, and the healthcare sector.
- Landmark Reforms
- GST rate structure simplified: From 4 slabs to just 2 – Standard Rate (18%) and Merit Rate (5%), with a 40% de-merit rate on select items (like pan masala, gutkha, aerated beverages, tobacco).
- Insurance relief: No GST on life insurance policies (term, ULIP, endowment) and health insurance policies (family floaters, senior citizen policies). This will make insurance more affordable and widen coverage.
- Emphasis on citizens and small businesses: GST reforms designed to improve ease of doing business and reduce tax burden on the common man.
- GST Relief on Essential Goods & Services
- Daily-use items:
- Hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware – reduced to 5%.
- Food & beverages:
- UHT milk, paneer, roti, chapati, paratha: NIL GST. – Packaged foods like namkeens, noodles, chocolates, coffee, sauces, ghee, butter: reduced to 5%.
- Housing & construction:
- Cement GST reduced from 28% to 18%.
- Healthcare:
- 33 lifesaving drugs now at NIL GST; cancer and rare-disease drugs at NIL; other medicines down to 5%.
- Medical devices (glucometers, bandages, diagnostic kits, surgical instruments): 5%.
- Transport & vehicles:
- Small cars, motorcycles (≤350cc), ACs, TVs (up to 32”), dishwashers: reduced to 18%.
- Buses, trucks, ambulances: reduced to 18%.
- Uniform 18% on all auto parts; correction of inverted duty structure for textiles & fertilizers.
- Hospitality & services:
- Hotel rooms up to Rs. 7,500: reduced to 5%.
- Gyms, salons, yoga centres, barber shops: reduced to 5%.
- Daily-use items:
- Focus on Agriculture and Labour
- Agricultural machinery (tractors, harvesters, threshers, irrigation equipment): reduced to 5%.
- Fertilizers and raw materials (sulphuric acid, nitric acid, ammonia): reduced to 5%.
- Labour-intensive sectors (handicrafts, marble blocks, granite blocks, leather goods): reduced to 5%.
- Renewable energy devices (solar, wind, bio-gas, waste-to-energy): reduced to 5%.
- Trade and Business Facilitation
- Pan masala, gutkha, cigarettes, chewing tobacco: GST to be levied on Retail Sale Price (RSP) instead of transaction value – to curb tax evasion.
- GST Appellate Tribunal (GSTAT): To be operational by September 2025; hearings to begin December 2025. It will also act as the National Appellate Authority for Advance Ruling.
- Appeals backlog deadline: 30th June 2026 set for filing old appeals.
- Refund system improvement: 90% provisional refunds for inverted duty structure cases through risk-based data analysis.
- FAQs and clarifications to be issued for businesses to reduce confusion.
- Implementation Timeline
- Services: New rates applicable from 22nd September 2025.
- Goods: New rates applicable from 22nd September 2025 (except tobacco/pan masala).
- Tobacco, gutkha, pan masala: Current rates continue until cess-related loans are fully repaid.
- Phased implementation ensures fiscal balance while easing compliance for businesses.
- Expected Impact
- Lower cost of living for households due to reduced GST on essential items.
- Boost for healthcare sector with cheaper medicines and medical equipment.
- Support for farmers and labour-intensive industries, increasing competitiveness.
- Simplification of tax system will make compliance easier for businesses, especially SMEs.
- Stronger dispute resolution with operational GSTAT, building trust in the GST framework.
Conclusion
The 56th GST Council meeting represents a historic shift towards a simplified, fair, and citizen-friendly tax system. By cutting taxes on essential goods, medicines, agriculture, and services, while strengthening the institutional framework of GST, the reforms aim to balance government revenues with public welfare.
7. Sector-wise GST Rate Comparison (Before vs After)
Daily-use Items
| Item/Service | Before | After |
| Hair oil, soaps, shampoos, toothpaste, toothbrushes | 12% / 18% | 5% |
| Toilet soap bars | 18% | 5% |
| Bicycles, kitchenware, household articles | 12% | 5% |
Food & Beverages
| Item/Service | Before | After |
| UHT milk, paneer, chapati, roti, paratha | 5% | NIL |
| Namkeens, noodles, chocolates, sauces, coffee | 12% / 18% | 5% |
| Butter, ghee | 12% | 5% |
| Cornflakes, pasta | 18% | 5% |
Healthcare
| Item/Service | Before | After |
| 33 lifesaving drugs | 12% | NIL |
| Cancer & rare-disease drugs | 5% | NIL |
| Other medicines | 12% | 5% |
| Medical devices (bandages, glucometer, kits) | 12% / 18% | 5% |
Vehicles & Transport
| Item/Service | Before | After |
| Small cars, motorcycles ≤350cc | 28% | 18% |
| ACs, dishwashers, TVs (≤32 inch) | 28% | 18% |
| Buses, trucks, ambulances | 28% | 18% |
| All auto parts | Varied | 18% (uniform) |
Agriculture
| Item/Service | Before | After |
| Tractors, harvesters, threshers | 12% | 5% |
| Irrigation/sprinklers, drip irrigation system | 12% | 5% |
| Fertilizer inputs (sulphuric acid, nitric acid, ammonia) | 18% | 5% |
Housing & Construction
| Item/Service | Before | After |
| Cement | 28% | 18% |
Hospitality & Services
| Item/Service | Before | After |
| Hotel rooms ≤ ₹7,500 | 12% | 5% |
| Gyms, salons, yoga, barber services | 18% | 5% |
We expressly disclaim liability to any person in respect of anything done in reliance of the contents of this publication.
Source: Press release 03.09.2025
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