News: The 56th GST Council has recommended changes in GST tax rates on goods and services, from 22 September 2025.
About Goods and Services Tax (GST) 2.0
- Goods and Services Tax is a comprehensive, multi-stage, destination-based indirect tax on goods and services.
- Purpose: Its primary purpose is to achieve “One Nation, One Tax” by reducing cascading taxes, simplifying compliance, and expanding the tax base.
- Launch: It was introduced on 1 July 2017 through the 101st Constitutional Amendment Act, 2016.
- Earlier structure
- Five slabs existed at 0, 5, 12, 18 and 28 percent with cess on luxury and sin goods.
- Exemptions: Essential items such as food grains, medicines and education were exempt, while petroleum, alcohol and electricity remained outside GST.
New GST Rate Structure
- Simplification: Slabs are reduced to two main rates plus a special rate.
- Main slabs: 5 % and 18 % apply on most goods and services.
- Special 40 % rate: Applies to sin goods and select super-luxury items.
- Key reductions – A brief
- Daily-use items like soap, shampoo, toothpaste, bicycles, and kitchenware move to 5 percent.
- Agricultural goods: Reduction of GST from 12% to 5% on agricultural goods, such as tractors, agricultural, horticultural or forestry machinery for soil preparation or cultivation etc.
- Cement reduces from 28 percent to 18 percent.
- Small cars, motorcycles under 350cc, air conditioners, televisions, and dishwashers shift to 18 percent.
- Uniform rate of 18% on all auto parts irrespective of their HS code; Three-Wheelers from 28% to 18%.
- Staples such as milk, paneer, rotis, chapatis, and parathas are at 0 percent.
- 33 Life-saving drugs and spectacles are corrected to 0–5 percent.
- To fix inverted duty, man-made fibre, yarn, fertilizers, acids, and ammonia reduce to 5 percent.
- Pan masala, gutkha, cigarettes, chewing tobacco, unmanufactured tobacco and bidi continue at existing GST slabs.
- Revenue impact: The estimated loss is ₹48,000 crore, expected to be offset by higher compliance and buoyancy.
- Implementation timeline and exceptions: Rate changes for all goods except specified tobacco and bidi categories take effect from 22 September 2025.
About GST Council
- GST Council is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of goods and services tax in India.
- It is created under Article 279A.
- The GST council is the key decision-making body that will take all important decisions regarding the GST.
- The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.
- Head: The council is headed by the Union Finance Minister, who is assisted by finance ministers of all the states of India.
