56th GST Council Meeting: Consumer Relief & Tax Simplification

Introduction

The 56th Goods and Services Tax (GST) Council meeting, held on September 3, 2025, under the chairpersonship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, introduced several key reforms aimed at providing relief to consumers and facilitating trade. The recommendations of the council focus on significant GST rate changes, procedural reforms, and the operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT). This article provides a detailed breakdown of the key measures announced in the press release.

Also Read: 1. FAQs on decisions of 56th GST Council Meeting 2. Recommendations of 56th Meeting of GST Council

Key Changes in GST Rates

The council has recommended substantial changes to the tax rates on a wide range of goods and services, with the majority of changes aimed at reducing the tax burden on everyday items. These changes are scheduled to be implemented from September 22, 2025 after issuing the notifications with a few exceptions.

Food and Dairy Products: Several essential food items will now attract a lower GST rate or be completely exempt.

• Ultra-High Temperature (UHT) milk and pre-packaged/labeled chena or paneer will see their GST rate reduced from 5% to Nil.
• Common Indian breads like paratha, parotta, khakhra, chapathi, and roti will also be exempt from GST, reduced from 18% and 5% respectively to Nil.
• Other food items, including condensed milk, butter, cheese, and prepared vegetables, will see a reduction from 12% to 5%.

Household and Personal Care Products: The council has also slashed GST rates on several consumer goods.

• Talcum powder, face powder, and toilet soap will be taxed at 5% instead of 18%.
• Television sets, monitors,Air-conditioner and projectors will now fall under the 18% bracket, down from 28%.
• Handbags, shopping bags, and other hand-held items made of cotton or jute will see a reduction from 12% to 5%.

Other Notable Changes: The press release also detailed other changes that impact various sectors:

• The GST rate on coal, lignite, and peat will increase from 5% to 18%.
• The council has decided that GST on products like pan masala, gutkha, and cigarettes will be levied on the Retail Sale Price (RSP) instead of the transaction value.
• GST Rate on Pan Masala, Caffeinated Beverages, Carbonated Beverages of Fruit Drink or Carbonated Beverages with Fruit Juice will increase from 28% to 40%.
• Many items under the agriculture sector, including certain fixed-speed diesel engines, bio-pesticides, and specified agricultural machinery, will see their GST reduced from 12% to 5%.
• GST is exempted from all individual health & life insurance, along with re-insurance thereof.

Automobile Sector:

• GST Rate on Small Cars (Petrol/LPG/CNG <1200cc & length <4m) (Diesel <1500cc & length <4m) will decrease from 28% to 18%.
• GST Rate on Mid-size & Large Cars (Exceeding 1500cc & length >4m) will increase from 28% to 40%.
• No Change in Electronic Vehicles
• GST Rate on Two-Wheelers (Engine capacity ≤ 350cc) will decrease from 28% to 18% and (Engine capacity > 350cc) will increase from 28% to 40%.
• GST Rate on all Auto Parts & Accessories will be 18% (uniform rate)
• Compensation Cess on all Motor vehicles have been eliminated.

Measures for Facilitation of Trade

In addition to rate changes, the council has recommended several process reforms to simplify GST compliance and improve the ease of doing business.

• Operationalization of GSTAT: A major highlight of the meeting was the decision to make the Goods and Services Tax Appellate Tribunal (GSTAT) operational. It will be ready to accept appeals before the end of September 2025 and begin hearings by the end of December 2025. This is expected to provide a robust dispute resolution mechanism and greater certainty for taxpayers.
• Provisional Refunds: The council recommended an amendment to the CGST Rules, 2017, to allow for the sanction of 90% of provisional refunds for zero-rated supplies. This will be based on a system of risk identification and evaluation, streamlining the refund process for exporters and SEZ units.
• Intermediary related changed of provisions: The Council recommended omission of clause (b) of section 13(8) of IGST Act 2017. Accordingly, after the said law amendment, the place of supply for “intermediary services” will be determined as per the default provision under section 13(2) of the IGST Act, 2017 i.e. the location of the recipient of such services. This will help Indian exporters of such services to claim export benefits.
• Post Sale Discount Impact: The council has recommended to omit section 15(3)(b)(i) of CGST Act, 2017 thereby omitting the requirement of establishing the discount in terms of an agreement entered into before or at the time of such supply and specifically linking of the same with relevant invoices. With this changes no pre-existing agreement required. The issuance of a credit note is the sole basis. This would make it easier for businesses to offer post-sale discounts without the need for complex pre-supply contracts or detailed invoice mapping. The new regime would focus on the issuance of a credit note under Section 34.
• Sanction of risk-based provisional refund to facilitate refund claims: The Council recommended amendment in rule 91(2) of CGST Rules, 2017 and Section 54(6) of the CGST Act, 2017 to provide for sanction of 90% of refund claimed as provisional refund by the proper officer on the basis on identification and evaluation of risk by the system. However, in exceptional cases, the proper officer may for reasons to be recorded in writing, instead of granting refund on provisional basis proceed with the detailed scrutiny of the refund claim. The Council recommended issuance of a notification to notify certain category of registered persons who may not be granted refund on provisional basis. This provision shall be operationalised from 1st November, 2025.
• Introduction of Simplified Registration Scheme for small suppliers supplying through electronic commerce operators: The Council approved in-principle, the concept of a simplified GST registration mechanism for small suppliers making supplies through ecommerce operators (ECOs) across multiple States facing challenges in maintaining principal place of business in each State as currently required under the GST framework. The detailed modalities for operationalizing the said scheme will be placed before GST Council. It will ease compliance for such suppliers and facilitate their participation in ecommerce across States.

Conclusion

The 56th GST Council meeting’s recommendations signify a strategic move by the government to alleviate the financial strain on the general populace by making a wide range of goods and services more affordable. The reduction of GST rates on essentials, coupled with the new measures for trade facilitation and the operationalization of GSTAT, demonstrates a clear commitment to simplifying the tax structure and creating a more transparent and efficient GST regime. While certain rate hikes and a staggered implementation for tobacco products exist, the overall thrust of the council’s decisions is overwhelmingly consumer-friendly and pro-business.