Reference:

• The 56th GST Council meeting was held on 3-4 September 2025 in New Delhi, chaired by Union Finance Minister Nirmala Sitharaman.

Key Participants:

• Finance Ministers of the Centre and States, Chief Ministers of Delhi, Goa, Haryana, Jammu & Kashmir, Meghalaya, and Odisha, along with other senior officials.
• This meeting was crucial to implement Next-Generation GST Reforms, as announced by Prime Minister Narendra Modi on 15 August 2025 from the Red Fort.

Key Points and Reforms

1. Simplification of GST Rates

• The current four-tier GST rate structure (5%, 12%, 18%, and 28%) has been simplified into a “Simple Tax” system with only two rates:

• • Standard Rate: 18% (applied on non-essential goods for revenue stability)
  • Merit Rate: 5% (applied on essential goods to reduce costs for common people)
  • Certain special goods and services will have a special demerit rate of 40%.

2. GST Reduction for Common Goods and Services

• Daily use items: Hair oil, soap, shampoo, toothbrush, toothpaste, bicycles, kitchenware, and other household items — GST reduced from 12% or 18% to 5%.
• Food items: Packaged snacks, bhujia, sauces, pasta, instant noodles, chocolate, coffee, butter, ghee, and cornflakes — GST reduced from 12% or 18% to 5%.
• Dairy and bakery products: UHT milk, pre-packed and labeled paneer/cheese — GST reduced from 5% to 0%. All Indian bread (chapati, paratha, poori, etc.) — GST removed.

3. Exemptions and Reductions in Key Sectors

Health and Medical

• Life-saving medicines: 33 life-saving drugs — GST reduced from 12% to 0%
• Cancer and rare disease medicines: 3 medicines used for treatment — GST reduced from 5% to 0%
• Other medicines and medical equipment: All other medicines — GST reduced from 12% to 5%; medical devices like diagnostic kits, bandages, and glucometers — GST reduced from 12% or 18% to 5%
• Health and life insurance: All private life and health insurance policies — fully exempt from GST to make insurance affordable for common people

Automobile Sector

• Small cars and motorcycles: Vehicles up to 350 cc — GST reduced from 28% to 18%
• Buses and trucks: GST reduced from 28% to 18%
• Auto parts: Uniform rate of 18% on all auto components; three-wheelers — GST reduced from 28% to 18%

Industry and Business

• Textile sector: Hand-spun yarn — GST reduced from 18% to 5%; man-made yarn — GST reduced from 12% to 5%
• Cement: GST reduced from 28% to 18%
• Handicrafts and stones: Handicrafts, marble, granite blocks, and leather goods — GST reduced from 12% to 5%
• Fertilizers: Sulphuric acid, nitric acid, ammonia — GST reduced from 18% to 5%
• Renewable energy: Renewable energy equipment — GST reduced from 12% to 5%

Service Sector

• Hotel accommodation: Rooms priced at ₹7,500 per unit per day — GST reduced from 12% to 5%
• Personal services: Beauty and wellness services like gyms, salons, barbers, yoga centers — GST reduced from 18% to 5%

Effective Date: These changes will be implemented from 22 September 2025, except for tobacco products, which will follow later under certain conditions.

Goods and Services Tax (GST) – General Information

• Definition: GST is an indirect tax imposed on the sale, manufacture, and consumption of goods and services in India.
• Objective: To simplify the tax system, coordinate tax collection between the Centre and States, and reduce tax evasion.

Start and Legal Basis:

• Implemented on: 1 July 2017
• Legal Basis:

• • Constitution (122nd Constitutional Amendment Act, 2016
  • GST Act 2017 (CGST, SGST, IGST)

Types of GST

• CGST (Central GST): Collected by the Centre
• SGST (State GST): Collected by the State
• IGST (Integrated GST): Collected on inter-state transactions

Key GST Documents

• GSTIN (GST Identification Number): Registration number
• GST Return Filing: Online submission of returns
• Tax Invoice: Document for purchase/sale

GST Applicability

• Applicable in all states and Union Territories
• Both Centre and States share the revenue

Constitutional Provisions Related to GST

• Article 246A: Authority of Parliament and State Legislatures to levy GST
• Article 269A: Distribution of IGST between states
• Article 279A: Establishment, function, and structure of the GST Council
• Article 366(12A): Definition of Goods and Services Tax

GST Council – General Information

Establishment: Under Constitution (101st Amendment) Act, 2016

Legal Basis: Article 279A

Objective: To coordinate between Centre and States for GST administration, policy formulation, and reforms

Structure

• Chairperson: Union Finance Minister
• Members:

• • Finance Ministers of all States or their representatives
  • One representative from the Centre

Decision-Making

• Quorum: At least half of the members must be present
• Voting: Decisions require three-fourth (75%) majority

• • Centre’s vote weight: 1/3
  • States’ collective vote weight: 2/3

Key Functions

• Determining tax rates and policy
• Reforming exemptions and tax structures
• Resolving disputes between States and Centre
• Recommending technical and administrative improvements in GST
• Ensuring simple and transparent tax policy for traders and citizens

Special Powers

• Approval of GST rates or changes is mandatory before any state or Centre can implement them
• Controls IGST distribution and tax collection among states
• Maintains uniformity and balance in tax policy