GST Council Announces Major Tax Reforms
The 56th meeting of the GST Council, chaired by Union Finance Minister Smt. Nirmala Sitharaman, concluded on September 4, 2025, in New Delhi. The council announced sweeping reforms aimed at simplifying the tax structure, easing compliance, and providing relief to citizens.
Key Decisions from the Meeting
The GST Council’s major recommendations include:
- Rate Rationalization: The existing four-slab structure (5%, 12%, 18%, and 28%) will be replaced with a simplified two-slab system of 5% for essential goods and 18% for standard items. A separate 40% special tax will be levied on “sin” and luxury goods.
- Relief for Consumers: GST rates have been reduced on a wide range of everyday items, including personal care products like hair oil and shampoo, household goods, and medical supplies. This is expected to lower prices and provide financial relief to the middle class.
- Boost for Key Sectors: The Council approved rate reductions for several industries, including:
- Automotive: GST on small cars and motorcycles below 350cc has been lowered to 18% from 28%.
- Apparel and Footwear: Items priced up to ₹2,500 will now be in the 5% slab.
- Agriculture: GST on agricultural machinery and fertilizers has been reduced.
- Valuation for Tobacco Products: Pan masala, cigarettes, and other tobacco products will continue to be taxed at existing rates (28% GST plus compensation cess) for now. The new 40% “sin tax” will be applied to these items once the government’s loan and interest obligations under the compensation cess account are fully discharged.
These changes are set to take effect from September 22, 2025, which is the first day of Navratri, with the exception of tobacco products. The reforms are a significant step toward simplifying India’s indirect tax system and are expected to boost consumption and economic activity.