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.