GST 56th Council Meeting: What It Means for the Garment & Textile Industry

The 56th meeting of the GST Council has ushered in one of the most significant structural changes to India’s indirect tax system. For the garment and textile sector—a labour-intensive industry with strong export potential—these reforms are particularly noteworthy. The new rate structure aims to resolve long-standing issues, simplify compliance, and enhance competitiveness.

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Simplification of Rate Structure

Earlier, garments were taxed under a dual-rate system:

• 5% GST for items priced up to ₹1,000 per piece
• 12% GST for items priced above ₹1,000 per piece

This structure not only created confusion but also led to classification disputes and compliance hurdles. The 56th GST Council Meeting has now collapsed this into a cleaner framework aligned with the broader two-rate GST structure (5% Merit, 18% Standard).

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Comparative Chart: Old vs New GST Rates on Garments

Category	Earlier GST Rate	New GST Rate (Post 56th Council)	Remarks
Apparel/garments (value ≤ ₹1,000 per piece)	5%	5% (Merit rate)	Retained for affordability; no change.
Apparel/garments (value > ₹1,000 but ≤ ₹2,500 per piece)	12%	5% (Merit rate)	Significant relief; shifted to lower slab.
Apparel/garments (value > ₹2,500 per piece)	12%	18% (Standard rate)	Aligned with standard GST slab for premium apparel.
Handloom, handmade & embroidered shawls, handicraft textiles	Varied (5–12%)	5%	Consolidated under merit rate to support artisans/MSMEs.
Manmade fibre	18%	5%	Correction of inverted duty structure.
Manmade yarn	12%	5%	Correction of inverted duty structure.

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Key Implications for the Industry

1. Removal of Inverted Duty Structure
• Manmade fibre and yarn brought down to 5%.
• This resolves a major working capital issue and reduces refund dependencies across the textile value chain.
2. Consumer Benefit on Mid-Range Apparel
• Garments between ₹1,000–₹2,500 now taxed at 5% instead of 12%.
• Middle-income consumers will see reduced prices, potentially boosting demand.
3. Premium Apparel Under Standard Rate
• Garments above ₹2,500 per piece now fall under 18%.
• This aligns luxury/premium apparel with the broader standard rate, ensuring clarity and uniformity.
4. Support for Artisans and MSMEs
• Handloom, embroidery, and handicraft textiles consolidated under 5%.
• This directly supports employment and rural livelihood.
5. Boost to Competitiveness
• With input costs rationalised, Indian garments and textiles are better positioned to compete globally, especially in export markets.

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Conclusion

The GST Council’s latest decisions mark a watershed moment for the garment and textile industry. By addressing inverted duty structures, rationalising garment rates, and supporting artisans, the reforms strike a balance between affordability, industrial growth, and revenue needs. The simplified rate framework is expected to reduce disputes, lower compliance costs, and provide a much-needed boost to both domestic consumption and exports.

 

GST Rate Cuts on Cars: What Car Dealers Need to Know

The GST Council’s 56th meeting has brought in one of the most significant tax rationalisation measures for the automobile sector since the rollout of GST. With effect from 22nd September 2025, the new rates are aimed at simplifying the tax structure, removing the cess burden, and rationalising costs for both dealers and buyers.

For car dealers, these changes have direct implications on pricing, margins, inventory, and customer communication.

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1. Revised GST Rates for Cars

The Council has restructured the rates across categories:

• Small Cars (Petrol/LPG/CNG up to 1200 cc & length ≤ 4000 mm; Diesel up to 1500 cc & length ≤ 4000 mm)

  • Earlier: 28%

  • Now: 18%

• Mid-Size and Large Cars (engine >1500 cc or length >4000 mm)

  • Earlier: 28% + Compensation Cess (17–22%) → effective 45–50%

  • Now: 40% flat GST (no cess)

• Utility Vehicles (SUVs, MUVs, MPVs, Crossovers, XUVs)

  • Conditions: engine >1500 cc, length >4000 mm, ground clearance ≥170 mm

  • Earlier: 28% + cess (~45–50%)

  • Now: 40% flat GST (no cess)

• Three-Wheelers (HSN 8703)

  • Reduced from 28% → 18%

• Buses and Passenger Vehicles (≥10 persons)

  • Reduced from 28% → 18%

• Ambulances

  • Reduced from 28% → 18%

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2. Impact on Car Dealers

a) Price Positioning & Sales Push

• Small cars become more attractive due to the tax reduction to 18%. Dealers can expect increased demand in the budget segment.

• Luxury cars and SUVs now face a flat 40% GST. While still high, the removal of compensation cess simplifies pricing and improves transparency for buyers.

b) Inventory Management

• Cars in stock before 21st September 2025 but sold after the new rates will attract revised GST as per time-of-supply rules. Dealers must carefully manage billing to avoid disputes.

c) Customer Communication

• Dealers should actively highlight the price reduction in small cars as a sales driver.

• For large cars/SUVs, while the effective tax incidence remains similar (~40–50%), the messaging can focus on simplified pricing without cess.

d) ITC & Margins

• Input Tax Credit (ITC) mechanisms remain unchanged. Dealers must ensure smooth reconciliation of ITC during the transition phase.

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3. Strategic Opportunities

• Promotions & Campaigns: Leverage the GST cut on small cars to run special festive offers or exchange schemes.

• Dealer Finance Planning: Lower GST on buses, three-wheelers, and ambulances may open cross-segment business opportunities.

• Transparency in High-End Cars: The move to a flat 40% GST without cess reduces complexity and can be pitched as a “simplified tax regime” to premium buyers.

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4. Key Compliance Points

• Apply new rates on supplies made from 22nd September 2025 onwards, regardless of booking date.

• Ensure correct invoicing under Section 14 of CGST Act, 2017 for transactions straddling the date of change.

• E-way bills already generated remain valid; no need for cancellation/reissue due to rate change.

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Conclusion

The GST reforms are a mixed bag for car dealers—with small cars getting a tax boost that may drive higher volumes, and large cars/SUVs settling into a simplified but still heavy tax slab of 40%.

Dealers should focus on:

• Promoting affordability in the small car segment.

• Positioning premium cars with simplified tax transparency.

• Re-aligning inventory, contracts, and customer outreach to capture the benefits of the new tax regime.

Overall, these changes are expected to invigorate demand in the mass market segment while bringing greater clarity to the premium category.

GST Rate Changes: Key Takeaways for GTA Service Providers and Transporters

The GST Council, in its 56th meeting, recommended a wide-ranging rate rationalisation exercise with effect   from  22nd  September  2025.  These  changes  impact  multiple  sectors,  including  goods transportation. For Goods Transport Agency (GTA) service providers and transport operators, the revised rates bring both opportunities and challenges, depending on their business structure, cost base, and compliance strategy.

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1. GST Framework for GTA Services

A GTA is defined under GST as any person who provides service in relation to the transport of goods by road and issues a consignment note. The taxability of GTA services has been an area of continuous discussion since the inception of GST.

Under the revised framework, GTA services will continue to be taxed at:

• 5% GST (without Input Tax Credit – ITC) – default merit rate.

• 18% GST (with full ITC) – optional, if the GTA chooses to avail ITC.

This dual rate structure provides flexibility but requires businesses to carefully evaluate their input tax profile and decide which option reduces their overall cost burden.

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2. No Blanket Exemption for GTA Services

The industry had been anticipating a complete exemption for GTA services, given their critical role in logistics and supply chain. However, the GST Council clarified that a full exemption would block ITC in the value chain and increase the effective cost of transportation.

Specific exemptions, however, remain available for GTA services involving essential commodities such as:

• Agricultural produce

• Milk

• Food grains

• Certain notified essential items (B2C supplies)

This targeted approach ensures affordability for essential goods while retaining credit flow in the larger business-to-business (B2B) logistics sector.

3. GST Rates for Other Transporters

Apart from GTAs, the rate rationalisation also covers other categories of transport service providers:

a) Container Train Operators (CTOs)

• Option of 5% GST without ITC or 18% GST with ITC.

b) Multimodal Transporters

• 5% GST (restricted ITC) if no air transport is involved.

• 18% GST (with ITC) if transportation by air is part of the multimodal movement.

c) Goods Transport Vehicles (Trucks, Lorries, etc.)

• Supply of goods transport vehicles (classified under HSN 8704) will now attract 18% GST (reduced from 28%).

• This change is expected to lower the fleet acquisition cost, improving liquidity for transporters and fleet operators. 

4. Transition Rules and Compliance

The GST Council has also addressed transitional issues linked to the effective date of rate change:

• Time of Supply rules under Section 14 of the CGST Act, 2017 will determine applicable rates where services are supplied before 22nd September 2025, but invoicing or payment occurs later.

• Input Tax Credit (ITC) availed prior to the change remains valid and can be utilised. However, if supplies become exempt post rate change, ITC will need to be reversed.

• E-way bills already generated will not need to be cancelled or reissued merely due to a rate change. 

5. Practical Implications for Businesses

For GTA Service Providers

• Evaluate whether to continue with 5% (no ITC) or opt for 18% (with ITC).

• Businesses with significant input costs (vehicles, spares, services) may benefit by switching to 18% with ITC.

For Fleet Operators / Transporters

• Lower acquisition cost of trucks and lorries (18% instead of 28%) reduces capital outflow.

• CTOs and multimodal operators gain flexibility similar to GTAs.

For Consignors / Consignees (Clients of GTA)

• Need to review contracts and determine who bears the GST burden under forward charge or reverse charge mechanism.

• Must account for the impact of time of supply provisions on contracts straddling the effective date.

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6. Strategic Considerations

• Cost Optimisation: Conduct a cost-benefit analysis of ITC versus non-ITC options.

• Contract Structuring: Ensure clarity on GST liability clauses, especially for long-term contracts.

• Compliance Management: Maintain updated systems for invoicing, e-way bills, and ITC reconciliations to avoid disputes.

• Client Communication: Proactively inform customers about rate changes and revised invoicing methodology.

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Conclusion

The GST Council’s latest reforms provide greater flexibility for GTA and transport service providers while ensuring credit flow in the supply chain. The reduction of GST on trucks and lorries will directly benefit fleet operators, while the continued dual-rate mechanism for GTA and CTO services allows businesses to align tax choices with their operational needs.

Overall, these changes are expected to rationalise costs, reduce disputes, and bring better clarity to the logistics sector—one of the most critical enablers of economic activity.

Simplified, Citizen-Centric GST: Key Decisions from the 56th GST Council

The 56th meeting of   the  GST  Council, chaired by Union  Finance Minister Smt. Nirmala Sitharaman, has  introduced a  series   of  landmark  reforms aimed at simplifying  the  tax  regime  and reducing the burden on citizens. The Council approved the rationalisation of the GST structure into just two principal rates—18% (Standard) and 5% (Merit)—along with a special demerit rate of 40% for select goods. This simplification is expected to ease compliance, improve transparency, and strengthen India’s tax ecosystem.

In a major relief to households, GST has been fully exempted on all life and health insurance policies, as well as on 33 life-saving drugs and several critical medical devices. Essential commodities such as Indian breads, UHT milk, paneer, soaps, shampoos, bicycles, and kitchenware have seen substantial reductions, while packaged foods like namkeens, noodles, chocolates, and coffee now fall under the 5% rate. Cement, small cars, and motorcycles have also been moved to the 18% slab, easing costs for both consumers and industries.

To strengthen trade facilitation, the Goods and Services Tax Appellate Tribunal (GSTAT) will become operational by September 2025, ensuring faster dispute resolution and greater consistency in rulings. With phased implementation beginning on 22nd September 2025, these reforms reflect the government’s commitment to building a simpler, more inclusive, and growth-oriented GST framework.

The 56th meeting of the Goods and Services Tax (GST) Council, has paved the way for what is being termed as next-generation GST reforms. These changes, in line with Prime Minister Shri Narendra Modi’s Independence Day address, are designed to create a simplified, equitable, and citizen-centric tax framework that balances fiscal responsibility with ease of doing business.

Simplification of GST Rate Structure

A major structural reform has been announced with the rationalisation of the existing four-tier rate system into two principal slabs:

• Standard Rate: 18%
• Merit Rate: 5%
• With a special demerit rate of 40% on select goods and services.

This transition to a simplified framework is expected to enhance compliance, reduce classification disputes, and provide greater clarity to taxpayers.

Relief Measures for Citizens

The Council has placed strong emphasis on reducing the tax burden on essential goods and services:

• Insurance: All life and health insurance policies, including ULIPs, family floaters, and senior citizen plans, have been exempted from GST, making insurance more affordable and accessible.
• Healthcare: Over 33 life-saving drugs and critical medical equipment have been moved to the NIL or 5% bracket, significantly lowering healthcare costs.
• Essential commodities: Household products such as soaps, shampoos, bicycles, and kitchenware will now attract only 5% GST. Indian breads (chapati, roti, paratha, parotta) and UHT milk have been exempted entirely.
• Packaged foods: Rates on widely consumed packaged items including namkeens, noodles, chocolates, coffee, and ghee have been reduced to 5%.

Support for Key Sectors

To strengthen employment-intensive and growth-critical sectors, the following changes were approved:

• Agriculture: Tractors, soil preparation and harvesting machinery, and composting equipment reduced from 12% to 5%.
• Infrastructure: Cement moved from 28% to 18%, providing a fillip to construction and housing.
• Automobiles: Small cars, motorcycles (≤350cc), and TVs up to 32 inches have been brought under the 18% slab.
• Renewables: Devices and parts used in renewable energy projects reduced to 5%.
• Labour-intensive sectors: Handicrafts, marble, granite blocks, and intermediate leather goods shifted to the 5% rate.

Trade Facilitation and Dispute Resolution

The Council has also prioritised institutional strengthening:

• The Goods and Services Tax Appellate Tribunal (GSTAT) will be operational by September 2025, with hearings commencing before December. This will provide an efficient platform for dispute resolution and enhance consistency in advance rulings.
• Process reforms aimed at reducing compliance burden and litigation will be rolled out in phases.

Implementation Timeline

Most rate changes will come into effect from 22nd September 2025, with certain categories—particularly tobacco products—retaining existing rates until cess obligations are discharged.

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Source:  Recommendations of the 56th Meeting of the GST Council held at New Delhi, on 03 Sept., 2025, posted on 03 Sep. 2025 10:39 PM by PIB Delhi.

What’s New under GST ?

 

Starting April 2025 tax period, the values in Table 3.2 of GSTR-3B will be auto-populated from inter-state supply details declared in GSTR-1, GSTR-1A, and IFF, and will be non-editable.

✅ Key Points to Note:

1. Non-editable Table 3.2: You can no longer manually edit values in Table 3.2 of GSTR-3B.

2. Amendments: Any corrections must be done through amendments in GSTR-1A or in GSTR-1/IFF of subsequent tax periods.

3. Accuracy Matters: Ensure accurate reporting in GSTR-1, GSTR-1A, or IFF to avoid discrepancies in GSTR-3B.

4. Flexibility with GSTR-1A: Amendments via Form GSTR-1A can be done anytime before filing GSTR-3B.

❓FAQs at a Glance:

• Q: What changed?
  A: Table 3.2 values in GSTR-3B are now auto-filled and locked from April 2025.

• Q: How to fix wrong entries?
  A: Amend them in GSTR-1A or GSTR-1/IFF of future periods.

• Q: How to avoid issues?
  A: Ensure correct reporting in your original GSTR-1 submissions.

• Q: Deadline for GSTR-1A?
  A: No fixed deadline—as long as it’s done before filing GSTR-3B.

📌 This move aims to improve accuracy, reduce mismatches, and enhance compliance in GST filings.

Changes in GST, effective from 1st April, 2025

    Mandatory Input Service Distributor (ISD) mechanism for ITC

      Previously businesses could choose between ISC and Cross-charge method. But now they have to exclusively use ISD mechanism to distribute common ITC among their GST registration.

    10% mandatory pre-deposit of penalty amount for appeals before appellate authority in cases involving only demand of penalty without any demand of tax
   

    e-Invoicing

Business with Turnover over ₹10 crore (previously ₹100 crore) shall generate e-invoice and report it within 30 days from invoice date to invoice registration portal (IRP), if not, invoice is susceptible to be rejected on IRP. Also, IRN must be generated within 30 days from invoice date.

§  Generation of e-invoice (Procedure is as below)

a.       Register on e-invoice portal¹

b.       Get offline tool from portal

                                                                           i.      After logging in: help à tools à bulk generation tool

                                                                         ii.      This will provide an excel based e-invoice preparation tool.

c.        Fill in details in the tool as required

                                                                           i.      Invoice details (date, type, number)

                                                                         ii.      Supplier details

                                                                       iii.      Buyer details

                                                                       iv.      Item/service details

                                                                         v.      Additional details (if any)

                                                                       vi.      If data entry is repetitive and vast then we can preferably create masters (buyer, product, supplier) as per requirements to ease up the process.

d.       Validate and create JSON file

e.       Upload JSON file to IRP

                                                                           i.      Login

                                                                         ii.      e-invoice à Upload JSON

                                                                       iii.      select file

f.         after validation on IRP, it will assign Invoice Reference Number (IRN), then QR and Digital signature will be generated for invoices.

g.       We have successfully generated e-invoice download and print it.

 

         Multi Factor Authentication (MFA) 

Mandatory for all taxpayers from 1^st April 2025. For  login  into IRP, after entering the correct password, additional verification step will take place, it may be as per chosen method i.e. OTP on Registered mobile number/Email or authentication app (Sandes App, NIC-GST Sandes App) or biometrics (Available in future),

         Rationalization of GST rates.
          

     Unregistered person can now generate e-way bill using Form ENR-03

       ¹GST e-invoice portal  

1.     NIC-IRP 1: https://www.einvoice1.gst.gov.in

2.     NIC-IRP 2: https://www.einvoice2.gst.gov.in

      Both portals are interoperable allowing seamless switch overs between them during service disruptions i.e.  when one portal has too much load that it affects it’s operational capacity and slows down servers.

 

IMPLEMENTATION OF MANDATORY REPORTING OF HSN CODES IN TABLE 12 OF GSTR-1/1A

Phase- 2

It is mandatory for the taxpayers to report minimum 4 digits or 6 digits of HSN Code in table-12 of GSTR-1 on the basis of Aggregate Annual Turnover (AATO) in the preceding Financial Year. To facilitate the taxpayers, these changes are being implemented in a phase-wise manner on GST Portal wherein Phase 2 was implemented on GST Portal effective from 01st November 2022, Vide Notification No. 78/2020 – Central Tax dated 15th October 2020.

Till phase – 2, Manual user entry is allowed for entering HSN or description and warning or alert message is shown in case of incorrect HSN code. However, taxpayers are able to file GSTR- 1 after manual entry.

Phase- 3

Phase-3 of reporting of HSN codes in Table 12 of GSTR-1 & 1A is being implemented from February 2025 return period.

• Manual user entry of HSN w ill not be allowed.
• HSN code can be selected from drop down only.
• A customized description mentioned in HSN master w ill auto-populate in a new filed called “Description as per HSN Code”.

In Table-12 validation with regards to value of the supplies have also been introduced.

1. These validations will validate the value of B2B supplies shown in different Tables viz: 4A, 4B, 6B, 6C, 8 (recipient registered), 9A, 9B (registered), 9C (registered), 15 (recipient registered), 15A (recipient registered) with the value of B2B supplies shown in table-12.
2. Similarly, validations will validate the value of B2C supplies shown in different tables viz: 5A, 6A, 7A, 7B, 8 (recipient unregistered), 9A (export), 9A (B2CL), 9B (unregistered), 9C (unregistered), 10, 15 (recipient unregistered), 15A (recipient unregistered) with the value of B2C supplies shown in Table-12.
3. In case of amendments, only the differential value will be taken for the purpose of validation.

However, initially these validations have been kept in warning mode only, that means warning or alert message shall be shown in case of mismatch in values, whereas taxpayers will be able to file GSTR-1 in such cases. Further, in case B2B supplies are reported in other tables of GSTR-1, in that case B2B tab of Table-12 cannot be left empty.

The following additional enhancement have been made in Table-12 of GSTR- 1/1A:

1. Table 12 of GSTR-1/1A is now bifurcated into two tabs, namely, “B2B Supplies” & “B2C Supplies”. Taxpayers need to enter HSN summary details of B2B Supplies and B2C Supplies separately under respective tab.
2. A new button has been introduced in Table 12, “Download HSN Codes List”. Upon clicking of this button, taxpayer would be able to download an excel file with the updated list of HSN & SAC codes for goods and services along with their description.
3. The button for “Product Name as in My Master” has now been made searchable. Taxpayer can search the description provided by them in My HSN Master and upon selection of the same, the HSN code, Description as per HSN Code, UQC & Quantity shall be auto-populated. This is an optional functionality.

 COMPOSITE SUPPLY OF TRANSPORT OF GOODS

Enforcement agencies were raising demands for services like loading/ unloading, packing, unpacking, transshipment, temporary warehousing etc. holding them leviable to GST at the rate of 18% by interpreting last para of Question No. 6 of the FAQ issued by CBIC which states that “If such incidental services are provided as separate services and charged separately, whether in the same invoice or separate invoices, they shall be treated as separate supplies”, to mean that if a GTA shows packing charges, loading, unloading charges etc., separately in the invoice, the GTA becomes liable to pay GST at the rate of 18% on these services by treating them as cargo handling services.

Question was raised and matter was represented to clarify whether incidental/ ancillary services such as loading/ unloading, packing, unpacking, transshipment, temporary warehousing etc., provided in relation to transportation of goods by road is to be treated as part of Goods Transport Agency service, being composite supply, or these services are to be treated as separate independent supplies

After deliberations on the issue and based on recommendations of the 54th GST Council, it is now been clarified by the GST department, vide Circular No. 234/28/2024-GST, that ancillary or incidental services provided by GTA in the course of transportation of goods by road, such as loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as composite supply of transport of goods. The method of invoicing used by GTAs will not generally alter the nature of the composite supply of service. However, if such services are not provided in the course of transportation of goods and are invoiced separately, then these services will not be treated as composite supply of transport of goods.