Recent decisions on GST Rate Rationalization in 56th GST Council

The GST Council’s 56th meeting on 3rd Sept, 2025, introduced significant GST rate and slab rationalization measures that will take effect on September 22, 2025. The new structure proposes a reduction from four primary slabs to two: 5% (lower) and 18% (standard), with a special “sin” rate of 40% for luxury and demerit goods. Many items previously taxed at 12% and 28% will be shifted to the 5% and 18% slabs, respectively. The changes also introduce exemptions for goods like UHT milk, paneer, and certain stationery items. Furthermore, exemptions on GST for individual life and health insurance premiums have been approved. Businesses are advised to take proactive measures, including updating billing systems and invoices, reviewing product classifications and HSN/SAC codes, and recalculating prices to pass on the tax benefits to consumers. This is crucial to avoid penalties under anti-profiteering provisions and to manage the transition of stock and input tax credits effectively.

Some of important issues on change of GST Slab rates, Re-classification of Items and effective date of new slabs.

1. Reduction in Number of Slabs:

The GST Council approved major changes in the GST Rate Structure and Rationalizing Slabs from 5%,12%,18% and 28% to essentially 2 slabs. (i).5% (Lower Rate) and 18% (Standard Rate). Further , a special rate @40% “Sin “ Rate has been proposed for a small set of goods/services like PAN MASALA, TOBACCO, Certain LUXURY and SIN Goods like High End Cars, Cigarettes/Tobacco Products etc., and imposed Cess on such items are being restructured.

2. Many goods currently 12% are being coming into 5% and many items @28% shifted into 18%. Further, some items are moved to NIL or ZERO GST Rate like Ultra-heat treated Milk, Panner, Breads (Roti/Paratha ), Erasers stationery items. In this the CBIC has given Notifications Nos. 9 /2025,C.T.(Rate) & 10/2025,C.T.(Rate) dt.17.9.25. The New Rates will be effect from 22.09.2025,

3. The GST Council has approved major decisions to give exemption of GST on Insurance Premiums relating to Individual Life Insurance and Health Insurance Policies.

4. Important Suggestions to the Accountants and Taxpayers:

(i) Classification and Rate Identification: Map all products/Services to revised GST Rates, review HSN/SAC Codes and confirm with Notifications issued by the CBIC on 17.09.2025 and CGST Rules published as per the Gazette of India on 17.09.2025.

(ii) Update Systems & Invoices: Update Accounting Software, Billing Software with new slab rates and HSN Codes. Further, modify invoice formats to auto-reflect with revised slab rates.

(iii) Contracts & Pricing: Management inform to teams of finance, accounts and Tender Preparation Team, Drafting Agreement Team to insert clauses for rate variation. Re-calculate MRP/Sale Prices ad Pass benefit to the Customers to avoid compliance of Anti-Profiting Clauses.

(iv) Stock and ITC Transition: Management instruct to the accounts team to prepare stock statement as on 21.09.2025. Review Input Tax Credit eligibility for goods purchased at higher rate of tax but sold post sale after 22.0.2025 at lower or Exempted Rates.

Check Possibility of Inverted Duty Structure refund claims:

(v) GST Returns and Compliance: The Accounts team prepare and review before filling of GST Returns GST-1,GSTR-3Band GSTR-9 with correct rates for Prior (21.09.2025 and Post (22.09.2025) change of Slab Rates (Rate of GST). In this regard, management provide training to the accounts team on rate change and Requirement of Compliances.

(vi) Advisory & Communication:

The management of the organization (Taxpayer) inform to their vendor/Suppliers about applicable rates of GST w.e.f.22.09.2025 , Update customers and B2B clients for seamless Input Tax Credit Claims and also issue internal circulars of the Company for Billing Department, Purchase Department and Compliances department to avoid unnecessary notices and demand form the GST Authorities.

(vii) Relating to whole sellers/retailers of consumer goods: Update Price Labels and billing machines with new Slab Rates.

(viii) Important Suggestion to the Insurance Companies:

Inform to filed team and accounts team to Revise Billing for policies, ensure correct GST treatment.

(ix) Compliance Ricks:

(i).Anti-profiting provisions: Authorities may verify whether tax benefits are pass on to the consumers,

(ii). Revenue Audit: Instructions given to internal audit team to scrutiny applicable rate of GST as per new slabs during the transition months,

(x) Recommendations:

(i) Instruction to be given to your account and taxation team to prepare a rate impact analysis for your business,

(ii) Consult your Tax Advisor for industry for specific clarifications if any require and refer notifications on Goods/Services with HSN/SAC Code with Slab Rates w.e.f.22.09.2025.

(iii) Obtain exact List of Sin/Luxury Goods in the 40% slab.

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Disclaimer: This is a general advisory based on decisions of the 56^th GST Council and knowledge purpose only. Please verify with GST Official Notifications before implementations.