56th GST Council Meeting: Big GST Rate Cuts Announced, Focus on Common Man and Key Sectors

Delhi: The 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, has approved sweeping reforms in India’s indirect tax regime. The Council has rationalised GST slabs, reduced rates on essential goods, corrected inverted duty structures, and introduced a special 40% rate only for luxury and sin goods.

Prime Minister Narendra Modi hailed the reforms as “Next-Generation GST,” calling them a major step towards ease of living, benefiting the common man, farmers, MSMEs, and small businesses.

Two-Slab GST System Introduced

The GST Council has cut down the multiple slab structure into just two primary rates – 18% and 5%, with an additional 40% slab for sin and super luxury goods.

• 40% rate applies to: paan masala, gutka, cigarettes, chewing tobacco, zarda, bidis, carbonated sugary drinks, and personal-use luxury items like yachts, helicopters, aircraft, and super-premium cars.
• 18% and 5% rates cover the rest, with many items witnessing reductions from higher slabs.

#WATCH | Delhi: After the 56th GST Council meeting, Union Finance Minister Nirmala Sitharaman says, "There is a special rate which is 40%. Almost all goods are between 18% and 5%. There is one special rate which is only for sin and super luxury goods. That special rate of 40% has… pic.twitter.com/nFZZMhbfVi

— ANI (@ANI) September 3, 2025

Key GST Reductions for Consumers

• Daily essentials: Hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware – down to 5%.
• Food items: Namkeen, noodles, sauces, chocolates, coffee, butter, ghee, cornflakes, preserved meat – cut to 5% from 12–18%.
• Milk products: Ultra-high temperature (UHT) milk, paneer, chena, Indian breads (roti, paratha, etc.) – now zero-rated.
• Consumer durables: ACs, TVs (all sizes), dishwashers, small cars and bikes (≤350 cc) – reduced from 28% to 18%.

Support for Health and Agriculture

• Healthcare: GST on 33 life-saving drugs reduced from 12% to 0%, while 3 critical drugs for cancer and rare diseases dropped from 5% to nil. Spectacles and vision correction goggles cut from 28% to 5%.
• Agriculture: GST reduced from 12% to 5% on tractors, agricultural machinery, bio-pesticides, and natural menthol.

ALSO READ| GST Council Meet: Insurance Companies Face Profitability Pressure as Rate Cuts Likely

Boost for Labour-Intensive & Renewable Sectors

• Textiles: Man-made fibre down from 18% to 5%, yarn from 12% to 5%, correcting inverted duty structures.
• Fertilisers: GST on sulfuric acid, nitric acid, ammonia reduced from 18% to 5%.
• Renewables: Solar panels, wind turbines, biogas and waste-to-energy plants now at 5% instead of 12%.
• Cement: GST slashed from 28% to 18%, giving a push to construction and infrastructure.
• Handicrafts & leather goods: Reduced to 5%, supporting artisans and small manufacturers.

Vehicles & Footwear

• EVs: GST remains 5%
• Small Cars: 18% (Petrol ≤1200 cc, Diesel ≤1500 cc, length limit as per regulations)
• All Other Cars: 40%
• Footwear:
  • Below ₹2,500 → 5%
  • Above ₹2,500 → 18%

Insurance Services

• Exempt from GST:
  • All individual life insurance policies (Term, ULIP, Endowment)
  • All individual health insurance policies (family floater, senior citizen, etc.)
  • Reinsurance of both life & health policies
• Objective: To make insurance more affordable and increase coverage.

Effective Date of New GST Rates

• All new GST rates (except sin goods): Effective 22 September 2025 (first day of Navratri)
• Sin goods (tobacco, paan masala, gutka, cigarettes, etc.):
  • Will continue at existing 28% + compensation cess until all loan and interest obligations under compensation cess are cleared.
  • After repayment, these products will move to the 40% slab.
  • The Union Finance Minister / GST Council Chairperson will announce the transition date.

Government’s Stand on Reforms

Union Finance Minister Nirmala Sitharaman said:

“These reforms have been carried out with a focus on the common man. Labour-intensive industries, farmers, and the health sector have been given major support.”

Prime Minister Narendra Modi, in his post on X (formerly Twitter), wrote:

“The GST Council has collectively agreed to broad-based GST rate rationalisation. These reforms will benefit the common man, MSMEs, women, and youth, while ensuring ease of doing business.”

The 56th GST Council meeting has marked one of the most comprehensive rounds of tax reforms since GST’s launch in 2017. With reduced rates on essentials, healthcare, agriculture, and manufacturing, the move is expected to boost demand, lower costs for households, and support India’s economic growth.

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