56th GST Council: Rate Changes and Reforms

56th GST Council: Rate Changes and Reforms

Briefing Document: 56th GST Council Meeting Recommendations

Date: 3rd September 2025 Location: Sushma Swaraj Bhavan, New Delhi Chairperson: Smt. Nirmala Sitharaman, Union Finance & Corporate Affairs Minister

Overview: The 56th GST Council meeting addressed significant changes in Goods and Services Tax (GST) rates for both goods and services, alongside measures aimed at trade facilitation and relief for individuals, the common person, and the aspirational middle class. Key recommendations include rate adjustments across various sectors, operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT), and process reforms to streamline GST com6pliance.

Main Themes and Most Important Ideas/Facts:

1. GST Rate Changes (Goods and Services) – Phased Implementation:

The Council has approved numerous GST rate changes, which will be implemented in a phased manner, generally taking effect from 22nd September 2025, with specific exceptions.

• General Implementation Date:
  

  “The Council was of the view that the changes in GST rates of goods and services need to be implemented with effect from 22nd September 2025.”

• Exceptions for Sin Goods:
  

  “Pan Masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi, will continue at the existing rates of GST and compensation cess where applicable, till loan and interest payment obligations under the compensation cess account are completely discharged.” The Union Finance Minister will decide the actual transition date for these goods.

1.1. Key Goods with Reduced GST Rates (Examples):

The majority of changes involve a reduction in GST rates, primarily from 12% to 5% or 18% to 5%. Notable reductions include:

• Food Sector:
  • 5% to Nil: Ultra-High Temperature (UHT) milk, pre-packaged and labelled Chena or paneer, Pizza bread, Khakhra, chapathi or roti.
  • 12% to 5%: Condensed milk, butter, cheese, various dried nuts and fruits (e.g., Brazil nuts, almonds, dates, figs), starches, various animal and microbial fats, sausages, prepared fish, refined sugar (with flavouring/colouring), pasta, prepared vegetables, jams, fruit juices (including pre-packaged tender coconut water), soya milk drinks, and other milk-based beverages.
  • 18% to 5%: Malt, vegetable saps and extracts, margarine, glycerol, vegetable/insect waxes, sugar confectionery, cocoa products (butter, fat, oil, powder, chocolates), malt extract preparations, corn flakes, pastry, cakes, biscuits, ice cream, water (packed in 20-litre bottles), plant-based milk drinks, gelatin, and dextrins.
• Agriculture and Fertilizer Sectors:
  • 12% to 5%: Fixed Speed Diesel Engines (up to 15HP), various hand pumps, drip irrigation nozzles and systems, agricultural machinery (for soil preparation, harvesting, poultry-keeping, bee-keeping), composting machines, most tractors, and agricultural trailers.
  • 18% to 5%: Sulphuric acid, nitric acid, ammonia, gibberellic acid, bio-pesticides (e.g., Bacillus thuringiensis, Neem-based pesticides), micronutrients (as per Fertilizer Control Order, 1985), rear tractor tyres and tubes, agricultural diesel engines, hydraulic pumps for tractors, and various tractor parts (e.g., wheel rims, centre housing, transmission housing, front axle support, bumpers, brakes, gear boxes, transaxles, road wheels, radiator assembly, silencer assembly, clutch assembly, steering wheels, hydraulic parts, fender, hood, wrapper, grill, side panel, extension plates, fuel tank).
• Health Sector:
  • 5% to Nil: Specific rare disease drugs like Agalsidase Beta, Imiglucerase, Eptacog alfa activated recombinant coagulation factor VIIa.
  • 12% to Nil: An extensive list of 33 drugs and medicines, including Onasemnogene abeparvovec, Asciminib, Mepolizumab, and others for serious medical conditions.
  • 12% to 5%: Anaesthetics, Potassium Iodate, Steam, Iodine, Medical grade oxygen, Medicinal grade hydrogen peroxide, various other drugs and medicines (e.g., Fluticasone Furoate + Umeclidinium + Vilanterol), glands and organs for organo-therapeutic uses, animal blood preparations, medicaments (Ayurvedic, Unani, Siddha, homoeopathic, Bio-chemic systems), wadding, gauze, bandages, pharmaceutical goods, all diagnostic kits and reagents, surgical/medical examination rubber gloves, blood glucose monitoring systems (Glucometers) and test strips, Patent Ductus Arteriousus/Atrial Septal Defect occlusion devices, corrective spectacles/goggles, medical/surgical instruments and appliances, mechano-therapy apparatus, breathing appliances, X-ray apparatus, and other drugs for personal use.
  • 18% to 5%: Medical/surgical thermometers, instruments for physical/chemical analysis for medical uses.
• Education Sector:
  • 5% to Nil: Erasers.
  • 12% to Nil: Maps, charts, atlases, globes, pencil sharpeners, pencils, crayons, pastels, drawing charcoals, tailor’s chalk, exercise books, graph books, laboratory notebooks, and notebooks.
  • 12% to 5%: Mathematical boxes, geometry boxes, and colour boxes.
• Common Man Items (12% to 5% or 18% to 5%): Tooth powder, candles, safety matches, feeding bottles and nipples, cotton/jute handbags, wooden tableware/kitchenware, umbrellas, sewing needles, kerosene burners/stoves, wood burning stoves, iron/steel/copper/aluminium household articles/utensils, brass kerosene pressure stoves, sewing machines, bicycles and parts, bamboo/cane/rattan furniture, hurricane lanterns, kerosene lamps, petromax, glass chimneys, combs, hair-slides, hairpins, curling pins/grips, hair-curlers, napkins/liners for babies, clinical diapers. Also, talcum powder, face powder, hair oil, shampoo, dental floss, toothpaste, shaving cream/lotion/aftershave, toilet soap, and toothbrushes.
• Consumer Electronics:
  • 28% to 18%: Air-conditioning machines, dishwashing machines, television sets (including LCD and LED), monitors, projectors, reception apparatus for television, and set-top boxes.
• Paper Sector:
  • 12% to Nil: Uncoated paper and paperboard for exercise books, graph books, laboratory notebooks, and notebooks.
  • 12% to 5%: Mechanical wood pulp, chemical wood pulp (soda/sulphate/sulphite), wood pulp from mechanical/chemical processes, pulps from recovered paper/paperboard, boxes/pouches/wallets of paper/paperboard, cartons, boxes, cases of corrugated/non-corrugated paper/paperboard, paper pulp moulded trays, paper splints for matches, asphaltic roofing sheets, paper sacks/bags, and biodegradable bags.
• Leather Sector (12% to 5%): Various types of prepared leather (bovine, sheep/lamb, other animals), chamois leather, patent leather, metallised leather, composition leather, skins and other parts of birds with feathers/down.
• Wood Sector (12% to 5%): Cement Bonded Particle Board, Jute Particle Board, Rice Husk Board, Glass-fibre Reinforced Gypsum Board (GRG), Sisal-fibre Boards, Bagasse Board, Cotton Stalk Particle Board, and Particle/fibre board from agricultural crop residues. Also, hoopwood, split poles, wood wool, wood flour, railway/tramway sleepers, sheets for veneering (for match splints), bamboo flooring, packing cases, wooden cable-drums, pallets, box pallets, barrel/vat products, tools/handles of wood, bamboo wood building joinery, tableware/kitchenware of wood, wood marquetry/inlaid wood, caskets/cases, statuettes/ornaments of wood, clothes hangers, spools, cops, bobbins, match splints, pencil slats, parts of oars/paddles/rudders, natural cork, articles of natural cork, and agglomerated cork.
• Defence (12% to 5%): Two-way radios (Walkie talkies) for defence/police/paramilitary forces, tanks, and armoured fighting vehicles.
• Footwear Sector (12% to 5%): Footwear with a sale value not exceeding Rs. 2500 per pair.
• Miscellaneous Items (12% to 5%): Live horses, marble/travertine blocks, granite blocks, natural menthol and related products (e.g., menthol crystals, peppermint oil), photographic plates/film for X-ray/medical use, exposed/developed photographic plates/films, silicon wafers, plastic beads, latex rubber thread, rubber bands, whips, riding-crops, ceramic pots/jars, corrective spectacle lenses, lamp/lantern globes/founts/chimneys, milk cans (Iron, Steel, Aluminium), animal shoe nails, sewing needles, bells/gongs/statuettes/ornaments of base metal, hand-operated rubber rollers, contact lenses, spectacle frames, coir products (excluding mattresses), and slide fasteners.
• Construction Sector:
  • 12% to 5%: Sand lime bricks, stone inlay work.
  • 28% to 18%: Portland cement, aluminous cement, slag cement, super sulphate cement, and similar hydraulic cements.
• Handicrafts Sector (12% to 5%): Idols of wood, stone (including marble) and metals (excluding precious metals), various stone statues/statuettes/ornaments, ceramic statues/ornamental articles, carved stone products, stone art ware, ornamental framed mirrors, glass statues/art ware, iron art ware, brass/copper/copper alloys art ware, aluminium art ware, handcrafted lamps, furniture of bamboo/rattan/cane, dolls/toys of wood/metal/textile, Ganjifa cards, worked ivory/bone/tortoise shell/horn/antlers/mother of pearl, worked vegetable/mineral carving, articles of lac/shellac, paintings/drawings/pastels, original engravings/prints/lithographs, original sculptures/statuary, collections of zoological/botanical/mineralogical/anatomical/historical/archaeological/paleontological/ethnographic/numismatic interest, and antiques over one hundred years old. Also, handmade paper and paperboard.
• Renewable Energy (12% to 5%): Solar cookers, solar water heaters and systems, bio-gas plants, solar power-based devices/generators, windmills, Wind Operated Electricity Generators (WOEG), waste-to-energy plants/devices, solar lanterns/lamps, ocean wave/tidal wave energy devices/plants, photovoltaic cells, and Fuel Cell Motor Vehicles (including hydrogen vehicles).

1.2. Key Goods with Increased GST Rates (Examples):

• Sin Goods (28% to 40% – effective from a later date): Pan masala, unmanufactured tobacco, cigars, cheroots, cigarillos, cigarettes, other manufactured tobacco/substitutes, and products containing tobacco/reconstituted tobacco intended for inhalation without combustion.
• Other Goods:
  • 5% to 18%: Coal, briquettes, ovoids, lignite, peat.
  • 12% to 18%: Other than natural menthol and related products (e.g., menthol crystals, peppermint oil), odoriferous preparations operating by burning (excluding agarbattis, lobhan, dhoop batti, dhoop, sambhrani), biodiesel (unless supplied to Oil Marketing Companies for blending with High Speed Diesel), chemical wood pulp (dissolving grades), various uncoated and coated papers/paperboards, composite paper/paperboard, corrugated paper/paperboard, and goods for petroleum operations under specific licenses/contracts.
  • 28% to 40%: Certain motor cars and other motor vehicles (principally for transport of persons, not falling under other categories with 18% rate), motor vehicles with spark-ignition or compression-ignition internal combustion engines and electric motors (exceeding 1200cc or 1500cc respectively, or exceeding 4000mm length), motorcycles of engine capacity exceeding 350cc, aircraft for personal use, yachts and other vessels for pleasure or sports, revolvers and pistols, and smoking pipes/cigar/cigarette holders.
• Textile Sector (12% to 18% for higher value items): Articles of apparel and clothing accessories (knitted/crocheted or not) with a sale value exceeding Rs. 2500 per piece. Other made-up textile articles and sets with a sale value exceeding Rs. 2500 per piece (excluding worn clothing/rags). Cotton quilts and wholly quilted textile material products with a sale value exceeding Rs. 2500 per piece.

1.3. Changes in Valuation and Exemptions for Specific Goods:

• RSP-based Valuation:
  

  “It has been decided that the GST will be levied on Retail Sale Price (RSP) instead of transaction value on Pan Masala, Gutkha, Cigarettes, Unmanufactured tobacco, Chewing tobacco like Zarda.” This is a significant change for these products.

• Ad Hoc Exemption: An “ad hoc IGST and compensation cess exemption on new armoured sedan Car imported by the President’s Secretariat for the President of India” has been granted.
• IGST 18% to Nil: Technical documentation for exempted goods, Natural Cut and Polished Diamonds (up to 25 cents) imported under Diamond Imprest Authorization Scheme, Works of art and antiques, Flight Motion Simulator and its parts, Target Motion Simulator and its parts, various parts/sub-assemblies for defence systems (HACFS, MRSAM, IADWS), Military transport aircraft (C-130, C-295MW), Deep Submergence Rescue Vessels, Unmanned Underwater vessels/platforms, Ejection Seats for fighter aircrafts, High performance batteries for drones/specialised equipment, Communication devices (including software defined radios), Air diving/rebreather sets/diving systems, Sonobuoys for naval air assets, Ship launched missiles, Rockets (calibre > 100mm), RPA (Remote Piloted Aircraft) for military use, and various parts/spares/accessories/tools/testing equipment/literature for artillery weapons, rifles, aircrafts (with specific exceptions).

1.4. Key Services with Revised GST Rates (Examples):

• Construction Sector:
  • 12% with ITC to 18% with ITC: Composite supply of works contract services predominantly involving earth work provided to Government, and composite supply of works contract and associated services for offshore oil and gas exploration/production.
• Hospitality Sector:
  • 12% with ITC to 5% without ITC:
    

    “Supply of “hotel accommodation” having value of supply of a unit of accommodation less than or equal to seven thousand five hundred rupees per unit per day or equivalent.”

• Transportation Sector:
  • 12% with ITC to 18% with ITC: Air transport of passengers (other than economy class), passenger transport by any motor vehicle where fuel cost is included, transport of goods in containers by rail (by non-Indian Railways), transportation of natural gas/petroleum crude/motor spirit/high speed diesel/ATF through pipeline, Transport of goods by GTA, renting of any motor vehicle (with operator) designed to carry passengers where fuel cost is included, renting of goods carriage (with operator) where fuel cost is included, and multimodal transport of goods within India.
• Job Work Sector:
  • 12% with ITC to 5% with ITC: Job work related to umbrellas, printing of goods under Chapter 48 or 49 (which attract 5% GST), bricks (attracting 5% GST), pharmaceutical products (Chapter 30), and hides, skins, and leather (Chapter 41).
  • 12% with ITC to 18% with ITC: Residual job-work services not elsewhere covered.
• Other Services:
  • 12% with ITC to 5% with ITC: Third-party insurance of “goods carriage”, admission to exhibition of cinematograph films (ticket price <= Rs. 100), treatment of effluents by Common Effluent Treatment Plants, treatment/disposal of biomedical waste by common bio-medical waste treatment facilities.
  • 18% with ITC to 5% without ITC: Beauty and physical well-being services.
  • 12% with ITC to 18% with ITC: Professional, technical, and business services related to exploration, mining or drilling of petroleum crude or natural gas, and support services to these activities.
• Gaming/Betting/Casinos (28% with ITC to 40% with ITC): Admission to casinos, race clubs, sporting events like the IPL, services by a race club for licensing bookmakers, leasing/rental services (without operator) of goods attracting 40% GST, and Specified Actionable Claims (betting, casinos, gambling, horse racing, lottery, online money gaming). Corresponding changes in lottery valuation rules are also being carried out.

1.5. Services Proposed to be Exempted:

• Life and Health Insurance (18% with ITC to Exemption):
  

  “All individual health insurance, along with reinsurance thereof” and “All individual life insurance, along with reinsurance thereof” are now exempted.

2. Operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT):

A significant step towards dispute resolution and enhancing ease of doing business.

• Timeline:
  

  “The Goods and Services Tax Appellate Tribunal (GSTAT) will be made operational for accepting appeals before end of September and will commence hearing before end of December this year.”

• Limitation for Backlog Appeals: A specific date of “30.06.2026 for limitation of filing of backlog appeals” has been recommended.
• National Appellate Authority:
  

  “The Principal Bench of the GSTAT will also serve as the National Appellate Authority for Advance Ruling.”

• Impact: These measures are expected to
  

  “significantly strengthen the institutional framework of GST by providing a robust mechanism for dispute resolution, ensuring consistency in advance rulings, and offering greater certainty to taxpayers. This will further enhance trust, transparency, and ease of doing business under the GST regime.”

3. Measures for Facilitation of Trade (Process Reforms):

These reforms aim to simplify compliance and ease the process for businesses.

• Risk-Based Provisional Refund for Zero-Rated Supply:
  • Amendment in rule 91(2) of CGST Rules, 2017 to allow
    

    “sanction of 90% of refund claimed as provisional refund by the proper officer on the basis of identification and evaluation of risk by the system.”

  • Operational from 1st November 2025.
• Risk-Based Provisional Sanction of Refunds (Inverted Duty Structure – IDS):
  • Recommendation to amend section 54(6) of the CGST Act, 2017 for 90% provisional refund for IDS cases, similar to zero-rated supply.
  • Pending amendment, the CBIC will administratively
    

    “start implementation of the revised system of grant of 90% provisional refunds arising out of Inverted Duty structure on the basis of data analysis and risk evaluation done by the system” from 1st November 2025.

• GST Refunds for Low Value Export Consignments:
  • Recommendation to amend section 54(14) of the CGST Act, 2017 to “remove the threshold limit for refunds arising out of exports made with payment of tax.” This will benefit small exporters, especially those using courier/postal modes.
• Simplified GST Registration Scheme for Small and Low-Risk Businesses:
  • Introduction of an
    

    “optional simplified GST registration scheme wherein registration shall be granted on an automated basis within three working days” for low-risk applicants and those whose output tax liability to registered persons will not exceed Rs. 2.5 lakh per month.

  • “This will benefit around 96% of new applicants applying for GST registration.”

  • Operational from 1st November 2025.
• Simplified Registration Scheme for Small Suppliers through E-commerce Operators (ECOs):

  • “Approved in-principle, the concept of a simplified GST registration mechanism for small suppliers making supplies through e-commerce operators (ECOs) across multiple States.”

  • Aims to “ease compliance for such suppliers and facilitate their participation in e-commerce across States.” Detailed modalities to follow.
  • Local Delivery Services through ECO: “Local delivery services to be notified under section 9(5) of the CGST Act in cases where the person supplying such services through electronic commerce operator is not liable for registration under GST.” The applicable rate will be 18%, and these services will be excluded from the scope of GTA services.
• Amendment in Place of Supply Provisions for Intermediary Services (Section 13(8) of IGST Act):
  • Recommendation to “omit clause (b) of section 13(8) ofIGST Act 2017.”
  • The place of supply for “intermediary services” will now be determined by “the location of the recipient of such services” (as per section 13(2) of the IGST Act).
  • This change is intended to “help Indian exporters of such services to claim export benefits.”
• Post-Sale Discount (Section 15 and 34 of CGST Act, 2017):
  • Recommendation 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.”

  • Amendment to section 15(3)(b) to require discounts to be granted via a credit note under section 34, and a corresponding amendment to section 34 to ensure “reversal of Input tax credit by the recipient in case where a post-sale discount is given and value of supply is reduced through GST Credit note.”
  • Circular No.212/6/2024-GST dated 26th June 2024 is to be rescinded.
  • Clarifications will be issued on issues like non-reversal of ITC on post-sale discount through financial/commercial credit notes, treatment of post-sale discount as additional consideration (manufacturer to dealer), and treatment as consideration for promotional activities by the dealer.

4. Retail Sale Price (RSP)-Based Valuation for Specific Goods:

• “The Council recommended retail sale price-based valuation under GST for Pan Masala, Cigarettes, Gutkha, Chewing Tobacco, Zarda, Scented tobacco and Unmanufactured Tobacco.”

• Consequent amendments in CGST Rules, 2017 and notifications will be carried out.

Important Note: The press release explicitly states that:

“The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of the stakeholders. The same would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law.”