56th GST COUNCIL MEETING – OUTCOME AT A GLANCE

The 56th GST Council meeting which was scheduled for 3-4 September, 2025 got concluded on first day itself with most of agenda getting completed. Since the launch of GST in 2017, the present GST reforms are a major and historic reforms touching upon one and all. GST reforms 2.0 as announced are the historic one in terms of rate rationalization and goes on to indicate that Government is always not behind revenue enhancement but can also go all out to take risks in larger consumer interest and then look forward to consumer behavior and higher consumption demand resulting from GST rate cuts.

GST Council took the risk of looking at higher demand - higher taxes based on volume rather than rate. It assumes that consumers will take advantage as inflation too is low in country. The Council and CBIC have also believed in businesses to pass on the benefit of rate cut to the consumers. The rate cut shall be made effective from 22.09.2025 for which various Notifications shall be issued.

This GST rate rationalization would help the consumption and in larger public issues of classification, tax disputes and also even out V S tariff impact on certain goods. All in all, economy will benefit and GST collection will would improve.

Businesses may give effect to this which may happen either by way of reduced prices or increased grammage in case of goods. GSTAT is also likely to see the light of the day with its functional dates recommended.

Key recommendations of the 56th GST Council meeting held on 03rd September, 2025

The 56th meeting of the GST Council was held on 3rd September, 2025, New Delhi under the chairpersonship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council inter-alia made the recommendations relating to changes in GST tax rates, provide relief to individuals, common man, aspirational middle class and certain measures for facilitation of trade in GST as enumerated below:

Rate Rationalisation (Goods)

• Proposal to shift to a dual-rate structure: 5% and 18%.
• Most 28% slab items (except sin goods) ? to 18%.
• Items in 12% slab ? to 5%.
• 40% slab will be applicable only for 6–7 sin/demerit goods.
• Will make 175 items cheaper (processed foods, dry fruits, dairy, packaged snacks, refrigerators, ACs, automobiles, tractors, etc.).
• Average GST incidence may drop from 11.5% to below 10%.
• Reduction of taxes on common-man items and aspirational goods: This would enhance affordability, boost consumption, and make essential and aspirational goods more accessible to a wider population
• Reduction of slabs: Essentially move towards simple tax with 2 slabs – standard and merit. Special rates only for select demerit / sin / luxury items.
• The new rate slabs will only be 5% and 18% and the slabs of 12% and 28% will be abolished.

List of Items Facing 40% GST in the Revamped System

The revised GST system places the following items under the 40% slab:

• Tobacco and Related Products: Cigarettes, cigars, gutka, pan masala, chewing tobacco, nicotine substitutes. These items also attract varying cess rates, up to 96%, due to their health impact.
• Sugar-Sweetened Beverages: Carbonated drinks, energy drinks, and caffeinated beverages, previously taxed at 28%, now face a 40% slab plus 12% cess on select items.
• Gambling and Betting: Lottery tickets, casino services, and online gaming platforms are proposed to be taxed at 40% without additional cess in some cases.
• Luxury Vehicles: High-end cars such as SUVs, above 1,500cc engines and vehicles longer than 4 metres, will fall into the 40% GST bracket, along with a 22% compensation cess.
• Processed Junk Foods: Items with high sugar, salt, or trans fat content like fast food and packaged snacks could also see a jump to the 40% rate.

Compensation Cess

• The abolishing of compensation cess has created fiscal space, providing greater flexibility to rationalise and align tax rates within the GST framework for long-term sustainability.
• The rate of 40% is a new rate in which compensation cess has been merged for items except pan masala / guthka / tobacco / etc. on which compensation cess will continue even after 22.09.2025 till the time Government decides.

Insurance & Healthcare

• No GST on individual health and life insurance premiums.
• Possible exemption under consideration.
• 36 life-saving drugs and medicines to be exempt from GST.

Ease of Living

• Registration: Seamless, technology-driven, and time-bound, especially for small businesses and startups.
• Return: Implement pre-filled returns, thus reducing manual intervention and eliminating mismatches.
• Refund: Faster and automated processing of refunds for exporters and those with inverted duty structure.

Operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT)

• 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.
• The Council also recommended the date of 30.06.2026 for limitation of filing of backlog appeals. The Principal Bench of the GSTAT will also serve as the National Appellate Authority for Advance Ruling.
• These measures will 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.

 Changes proposed in the law

• Sanction of risk-based provisional refund to facilitate refund claims on account of zero-rated supply of goods or services or both (i.e. export of goods or services or both or supply to a Special Economic Zone developer/unit for authorised operations
• Proposal for Risk-Based Provisional Sanction of refunds arising out of inverted duty structure (IDS)
• Amendment in CGST Act to provide for GST Refunds in respect of low value export consignments
• Simplified GST Registration Scheme for Small and Low-Risk Businesses
• Introduction of Simplified Registration Scheme for small suppliers supplying through electronic commerce operators
• Amendment in place of supply provisions for intermediary services under section 13(8) of the IGST Act
• Amendment of section 15 and section 34 of CGST Act, 2017 in respect of Post Sale Discount
• Issuance of circular on certain issues pertaining to Post Sale Discount

Please note that

• The changes in GST rates on services will be implemented with effect from 22nd September 2025.
• The changes in GST rates will not be applicable to goods such as pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi with effect from 22nd September 2025 and present rate regime will continue.
• 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.

Note: Since the recommendations are to be implemented w.e.f. 22.09.2025 MoF and CBIC are working with all stakeholders so as to iron out all possible disruptions and to ensure smooth transition and implementation. There are likely to be a series of Notification and Circulars issued to implement the Council’s recommendations.