The 56th GST Council Meeting: Major GST Reforms Effective September 22, 2025

The 56th GST Council, convened on September 3, 2025, announced one of the most significant overhauls of the Goods and Services Tax (GST) framework since its inception. Effective September 22, 2025, the GST regime will move to a simplified two-rate structure—5% for essential goods and 18% for most others— with a special de-merit rate of 40% for a few select products.

This landmark reform, described by Prime Minister Shri Narendra Modi as “Next-generation GST reforms” during his Independence Day speech on August 15, 2025, is aimed at making GST simpler, fairer, and more citizen-friendly.

What are the new changes in GST 2025?

The GST Council has approved wide-ranging reforms designed to benefit common citizens, small traders, farmers, and key sectors of the economy. The focus areas include:

- Rate rationalisation into two slabs (5% and 18%) for simplicity.

- Exemptions on life and health insurance policies to make them more affordable.

- NIL GST on essential food items like UHT milk, paneer, and Indian breads.

- Reduced GST on medicines, medical devices, and life-saving drugs.

- GST rationalisation on agricultural machinery, renewable energy devices, and labour-intensive industries.

- Lower GST rates on FMCG items, household essentials, and hospitality services.

This move is expected to improve compliance, reduce disputes, and support small businesses by correcting inverted duty structures and reducing tax burdens on critical sectors.

What are the new changes in GST?

Some of the most notable GST revisions are:

- Exemption of GST on insurance policies – All individual life and health insurance policies are now tax-free.

- Two-tier GST structure – 5% for merit goods (essentials), 18% standard rate for most products, and 40% de-merit rate for luxury/sin goods.

- Reduction of GST on essentials – Items like shampoos, soaps, bicycles, and kitchenware reduced to 5%.

- NIL GST on key food staples – Milk, paneer, roti, parathas, and other staple Indian breads.

- Healthcare relief – Life-saving drugs and medical devices brought down to NIL or 5%.

- Auto and mobility sector – GST on small cars, motorcycles, buses, and trucks reduced from 28% to 18%.

- Textile and fertilizer correction – Reduction to 5% to fix inverted duty structures.

Is GST still 9% in 2025?

No. The GST rate of 9% does not exist in the revised framework. The system has been simplified to two slabs: 5% and 18%, effective from 22nd September 2025.

2nd Phase GST changes from 22nd Sept PDF

The GST Council has clarified that the revised rates will be implemented in a phased manner:

- 22nd September 2025: GST changes for most goods and all services take effect.

- Exceptions: Tobacco, cigarettes, gutkha, and pan masala will continue at current rates until cess-related obligations are cleared.

- Detailed HSN-wise rate changes are being issued as an official PDF notification by the CBIC.

New GST rate changes list – 2025 Highlights

Here are some of the key changes every business and consumer should know:

- 5% GST rate (reduced from 12% or 18%): Namkeens, sauces, noodles, chocolates, butter, ghee, pasta, coffee, preserved meats.

- NIL GST rate: Paneer, Indian breads, milk, chena, life-saving drugs.

- 18% GST rate (reduced from 28%): Cement, TVs up to 32 inches, ACs, dishwashers, buses, trucks, small cars, motorcycles.

- 5% GST rate on agriculture and labour-intensive goods: Tractors, handicrafts, marble blocks, textile fibres.

- 5% GST rate on hospitality and wellness services: Hotel stays under ₹7,500/day, salons, gyms, yoga services.

- 5% GST rate on renewable energy devices.

GST rate change effective date

Effective from September 22, 2025, all revised GST rates for goods and services will come into force, except for select de-merit goods (like tobacco), which will continue under the existing structure until cess obligations are completed.

Next-generation GST Reforms – The Big Picture

These reforms are not just about tax cuts. They represent a citizen-centric and business-friendly shift in India’s taxation system. By simplifying compliance, reducing litigation, and easing the tax burden on critical sectors, the government aims to:

- Improve ease of doing business

- Support labour-intensive industries and agriculture

- Reduce cost of healthcare and insurance

- Encourage domestic consumption and growth

As Finance Minister Nirmala Sitharaman stated, this rationalisation is designed to ensure GST remains a progressive tax system benefiting the common man as well as businesses.

The 2025 GST reforms mark a turning point in India’s taxation system. By rationalising rates, reducing burdens on essentials, and correcting structural inefficiencies, the GST Council has created a more transparent and growth-oriented framework.

For businesses, this means new opportunities—but also new compliance challenges. Navigating revised rates, filings, and structures requires expert financial planning and tax advisory.

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FAQs

Q1: What are the new changes in GST 2025?

The 56th GST Council has rationalised the GST structure into two main slabs—5% for essential goods and 18% for most others, effective September 22, 2025. It also exempts individual health and life insurance policies, reduces GST on several household and agricultural goods, and lowers rates on medical equipment and drugs.

Q2: What are the key GST reforms effective from September 22, 2025?

The reforms include a simplified two-rate structure, major exemptions on insurance and healthcare, reduced rates on food, medicines, agriculture, and labour-intensive industries, and operationalisation of the GST Appellate Tribunal (GSTAT) for dispute resolution.

Q3: Is GST still 9% in 2025?

No. The GST rate of 9% does not exist under the revised regime. From September 22, 2025, GST will only follow a two-slab structure—5% and 18%, with a special 40% rate for de-merit goods.

Q4: Where can I find the 2nd phase GST changes from 22nd September 2025 (PDF)?

The official CBIC (Central Board of Indirect Taxes and Customs) website will release a sector-wise and HSN-wise rate changes PDF for businesses and taxpayers.

Q5: What is the new GST rate list in 2025?

The GST rate changes 2025 list includes:

- 0% on essential food items (UHT milk, paneer, Indian breads)

- 5% on common goods like shampoos, soaps, bicycles, agricultural goods, handicrafts, and medical devices

- 18% on most goods and services including automobiles, electronics, and hospitality services above ₹7,500 per day

- 40% on de-merit goods such as pan masala, gutkha, and cigarettes

Q6: What is the GST rate change effective date?

The revised GST structure will come into effect on September 22, 2025 for goods and services, except pan masala, gutkha, cigarettes, and unmanufactured tobacco, which will continue under the current rates until compensation cess obligations are cleared.

Q7: How will these GST reforms benefit small traders and businesses?

The simplified two-rate structure reduces compliance burdens, corrects inverted duty structures, lowers costs for agricultural and labour-intensive sectors, and ensures uniform taxation. This will enhance ease of doing business and provide relief to small traders.