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Key Recommendations of the 56th GST Council Meeting

The 56th GST Council meeting, held in New Delhi on September 3, 2025, focused on a strategic overhaul of the GST framework. The recommendations, aimed at benefiting the common person, farmers, and various industries, are centered around rate rationalization, trade facilitation, and compliance streamlining.

The council approved a new, simpler two-rate structure of 5% (Merit Rate) and 18% (Standard Rate), with a special 40% de-merit rate for select goods.

  • Insurance: A major recommendation is the exemption of GST on all individual life and health insurance policies and their reinsurance, a move to make insurance more affordable.

  • Common Man & Food Items:

    • Reduction to Nil (from 5%): Ultra-High Temperature (UHT) milk, pre-packaged and labelled chena or paneer, pizza bread, khakhra, chapati, and roti.

    • Reduction to 5% (from 12% or 18%): A wide range of daily-use items, including hair oil, soap, shampoos, toothbrushes, toothpaste, bicycles, most food items (e.g., packaged namkeens, sauces, pasta, chocolates), and medical equipment like glucometers and diagnostic kits.

    • Reduction to 18% (from 28%): Air-conditioning machines, televisions (all sizes), and dishwashing machines.

  • Agriculture & Industry:

    • Reduction to 5% (from 12%): Tractors, agricultural machinery, handicrafts, marble, granite, and renewable energy devices.

    • Reduction to 5% (from 18%): Sulphuric acid, Nitric acid, and Ammonia to correct the inverted duty structure in the fertilizer sector.

    • Reduction to 5% (from 18% or 12%): Man-made fiber and yarn to correct the inverted duty structure in the textile sector.

  • Automotive:

    • Reduction to 18% (from 28%): Small cars (not exceeding 1200cc for petrol/CNG or 1500cc for diesel), motorcycles under 350cc, buses, trucks, ambulances, three-wheelers, and all auto parts.

    • Special Rate of 40% (from 28%): Motor cars and other luxury/demerit vehicles with higher engine capacity or length.

  • Other Goods:

    • Reduction to 18% (from 28%): Cement.

    • Reduction of GST to NIL: 33 life-saving drugs (from 12%) and 3 drugs for cancer/rare diseases (from 5%).

Measures for Facilitation of Trade and Compliance

  • GSTAT Operationalization: The Goods and Services Tax Appellate Tribunal (GSTAT) is to become operational for accepting appeals by the end of September and begin hearings by the end of December 2025. A specific date of June 30, 2026, was recommended for filing backlog appeals.

  • Rate Implementation:

    • Phased Implementation: The new GST rates for services and most goods will be implemented from September 22, 2025.

    • Exception: Rates on pan masala, gutkha, cigarettes, and other specified tobacco products will remain at existing rates until compensation cess loan and interest obligations are discharged. The actual date of transition for these goods will be decided by the Union Finance Minister.

  • Provisional Refunds: Pending amendments, CBIC will begin administratively implementing a revised system to grant 90% provisional refunds for claims arising from an inverted duty structure, based on risk analysis.

  • Valuation: GST on specified tobacco products will now be levied on their Retail Sale Price (RSP) instead of the transaction value. The valuation rules for lottery tickets will also be amended.

  • Restaurant Services: A clarification will be issued to state that a stand-alone restaurant cannot declare itself a "specified premises" to avail the option of paying GST at 18% with ITC.

  • Exemption: An ad hoc IGST and compensation cess exemption was granted for a new armored sedan car imported for the President of India.