The Goods and Services Tax (GST) Council approves Next generation GST Reforms

Posted 04 Sep 2025

2 min read

Article Summary

The GST Council approved tax reforms including a two-rate slab, zero GST on essentials, reduced rates on consumer goods, exemptions on insurance, higher taxes on sin goods, and institutional improvements.

The 56th meeting of the GST Council recommended several key changes in the GST framework aimed at lowering the tax burden on common people.

Key Reforms Approved

Two-rate tax Slab Structure: GST rationalized into 5% (merit rate) and 18% (standard rate). The 12% and 28% slabs are scrapped. (With effect from 22^nd September 2025)
Cheaper Daily Essentials: Zero GST on milk, paneer, chapati, paratha; 5% on toiletries, medicines, bicycles, farm tools.
Relief on Consumer Goods: Small cars, TVs, ACs, and home appliances moved from 28% to 18%.
Insurance & Health: GST Exemptions on All life insurance policies & health insurance policies.
Higher Tax on Sin Goods: Tobacco, luxury cars, and aerated drinks are now taxed at 40%.
Support for Key Economic Sectors
- Reduced GST on Agricultural machinery and Fertilizer sector, renewable Energy devices and automobile structure.
- Correction of inverted duty structure on manmade fiber and manmade yarn.
Institutional Reforms: Operationalization of Goods and Services Tax Appellate Tribunal (GSTAT) for faster resolution of cases.

About GST Council

Constitutional body established under Article 279 (A) of Constitution through 101st Constitutional Amendment Act, 2016.
Constituted by the President with the Union Finance Minister as Chairperson.
Objective: Responsible for setting tax rates, making policy decisions related to GST and making recommendations to the center and states.