56th GST Council Meeting: Major GST Rate Reforms Effective from 22nd September 2025

The 56th GST Council meeting, held in New Delhi on 3rd September 2025, has introduced some of the most significant reforms since the launch of GST in India. These changes aim to simplify the tax structure, provide relief to the common man, boost healthcare and agriculture, and discourage consumption of luxury and harmful products.

Prime Minister Shri Narendra Modi had earlier unveiled the vision for next-generation GST reforms on 15th August 2025. Following this, the Council approved a wide range of rate rationalizations and exemptions that will take effect from 22nd September 2025.

Key Highlights of the 56th GST Council Meeting

• Introduction of a simplified two-rate structure – 18% (standard), 5% (merit), and 40% (de-merit) for selected goods.

• Insurance Relief – Life and health insurance policies (including senior citizen and family floater plans) now fully exempt from GST.

• Healthcare Boost – GST reduced on life-saving medicines, medical devices, and essential healthcare equipment.

• Everyday Essentials Cheaper – Lower tax on items like milk, paneer, butter, bread, soaps, toothpaste, bicycles, and packaged food products.

• Luxury and Harmful Goods Costlier – Higher GST on tobacco, pan masala, luxury cars, yachts, and energy drinks.

• Support for Farmers and MSMEs – Reduced rates on tractors, agricultural machinery, and handicrafts.

• Textile & Fertilizer Relief – Correction of inverted duty structure in man-made textiles and fertilizers.

GST Rate Reductions (Effective from 22nd September 2025)

Daily Essentials & Food Products

• Milk (UHT), Paneer/Chhena (packaged) – 5% ➝ 0%

• Roti, Chapati, Khakhra, Pizza Bread – 5% ➝ 0%

• Butter, Ghee, Condensed Milk – 12% ➝ 5%

• Dry Fruits, Cornflakes, Biscuits, Cakes, Pastries – 12–18% ➝ 5%

• Chocolates, Pasta, Instant Noodles, Sauces, Pickles, Jams, Namkeens – 12–18% ➝ 5%

• Drinking Water (20-litre jars), Soya/Plant-based Milk – 12–18% ➝ 5%

Healthcare & Medicines

• General Medicines – 12% ➝ 5%

• Medicines for rare diseases & cancer treatments – 5–12% ➝ 0%

• Medical equipment (oxygen kits, thermometers, diagnostic kits, glucometers) – 12–18% ➝ 5%

Agriculture & Rural Economy

• Tractors and agricultural machinery – 18% ➝ 5%

• Fertilizer inputs (sulphuric acid, nitric acid, ammonia) – 18% ➝ 5%

Industry & Services

• Cement – 28% ➝ 18%

• Man-made yarn & fibers – 12–18% ➝ 5%

• Renewable energy devices (solar, biogas, windmill) – 12% ➝ 5%

• Hotel accommodation (≤ ₹7,500/day) – 12% ➝ 5%

• Beauty & wellness services (gyms, salons, yoga centres) – 18% ➝ 5%

Vehicles

• Small cars, motorcycles ≤ 350cc, ambulances – 28% ➝ 18%

• TVs (up to 32”), ACs, washing machines – 28% ➝ 18%

• Bicycles, rickshaws, boats – 12% ➝ 5%

GST Rate Increases (Effective from 22nd September 2025)

• Pan Masala, Gutkha, Cigarettes, Tobacco – 28% ➝ 40% (implementation date to be notified)

• Energy, caffeinated, and carbonated drinks – 28% ➝ 40%

• Luxury Cars, SUVs, bikes above 350cc – 28% ➝ 40%

• Yachts, Private Jets – 28% ➝ 40%

• Coal, Lignite, Peat – 5% ➝ 18%

• Biodiesel (except oil companies) – 12% ➝ 18%

• Certain paper and pulp products – 12% ➝ 18%

Impact on Common People & Businesses

• Cheaper Products: Daily-use items, packaged food, medicines, medical devices, and agricultural equipment will now cost less, directly benefiting households and farmers.

• Costlier Luxury/Harmful Goods: Items such as tobacco, luxury cars, and energy drinks will become more expensive, promoting healthier and sustainable consumption.

• Healthcare Relief: GST exemptions and reductions on life insurance, health insurance, and medicines will make healthcare more affordable.

• Business Ease: Simplified tax structure and correction of inverted duty in textiles and fertilizers will reduce compliance burdens for industries.

Conclusion

The 56th GST Council meeting marks a significant milestone in India’s tax reform journey. By reducing GST on essential goods and services while increasing it on luxury and harmful items, the government has struck a balance between citizen welfare and economic discipline.

From 22nd September 2025, common households, farmers, and small businesses are expected to benefit from cheaper essentials, while luxury consumers will see higher costs on premium products.

This reform not only strengthens the GST framework but also reflects India’s vision of “Ease of Living” and “Ease of Doing Business.”

Dr. Nitin Kumar Modh
Professor
School of Law and Legal studies