Source: PIB Press Release
The 56th meeting of the Goods and Services Tax (GST) Council, chaired by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, has approved sweeping reforms aimed at making GST simpler, affordable, and business-friendly. The meeting focused on tax relief for the common man, sectoral corrections, simplification of the GST framework, and facilitation of trade.
These reforms mark the next generation of GST changes, aligning with Prime Minister Shri Narendra Modi’s Independence Day announcement from the Red Fort on August 15, 2025. The recommendations cover rate rationalisation, healthcare and insurance relief, industry-specific corrections, procedural reforms, and institutional strengthening.
Major Highlights of GST Council’s 56th Meeting
1. Insurance & Healthcare Relief
- GST fully exempted on all life insurance policies (term life, ULIPs, endowment) and their reinsurance.
- GST fully exempted on health insurance policies (individual, family floater, and senior citizen policies) and their reinsurance.
- Lifesaving medicines:
- 33 medicines reduced from 12% → NIL.
- 3 medicines (for cancer, rare diseases, severe chronic diseases) reduced from 5% → NIL.
- Other medicines: All drugs cut from 12% → 5%.
- Medical devices:
- Surgical/dental/veterinary apparatus cut from 18% → 5%.
- Bandages, gauze, diagnostic kits, glucometers cut from 12% → 5%.
2. Rationalised GST Rate Structure
The current four-tier GST system will be simplified to:
| Rate Category | New Rate | Remarks |
|---|---|---|
| Merit Rate | 5% | Essential/common goods & services |
| Standard Rate | 18% | Majority of goods & services |
| De-Merit Rate | 40% | Select harmful items (e.g., sin goods) |
3. Relief for the Common Man
| Item Category | Old Rate | New Rate |
|---|---|---|
| Toiletries (soaps, shampoos, toothpaste, hair oil, toothbrushes) | 12% / 18% | 5% |
| Bicycles, kitchenware, tableware, household goods | 12% / 18% | 5% |
| UHT Milk, paneer (pre-packaged & labelled), Indian breads (roti, paratha, chapati, parotta, etc.) | 5% | NIL |
| Packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, cornflakes, butter, ghee, preserved meat | 12% / 18% | 5% |
4. Agriculture & Farmers’ Relief
- Tractors, harvesters, soil preparation machinery, composting machines, fodder balers, grass mowers: 12% → 5%.
- Fertilizer inputs (sulphuric acid, nitric acid, ammonia): 18% → 5%.
5. Labour-Intensive Industries
- Handicrafts, marble & granite blocks, intermediate leather goods: 12% → 5%.
6. Automobiles & Transport
| Vehicle/Item | Old Rate | New Rate |
|---|---|---|
| Small cars, motorcycles ≤350cc | 28% | 18% |
| Buses, trucks, ambulances | 28% | 18% |
| Auto parts (uniform rate) | Varying | 18% |
| Three-wheelers | 28% | 18% |
| TVs ≤32 inches, ACs, dishwashers | 28% | 18% |
7. Housing, Cement & Infrastructure
- Cement: 28% → 18%.
8. Renewable Energy & Hospitality
- Renewable energy devices & parts: 12% → 5%.
- Hotels (≤₹7,500 per night): 12% → 5%.
- Beauty & wellness services (gyms, salons, barbers, yoga centres): 18% → 5%.
9. Textiles Sector
- Manmade fibre: 18% → 5%.
- Manmade yarn: 12% → 5%.
10. Tobacco & Related Products
- GST to be levied on Retail Sale Price (RSP) (instead of transaction value) for pan masala, gutkha, zarda, cigarettes, and chewing/unmanufactured tobacco.
- These items will continue at existing GST & cess rates until compensation cess loans are cleared.
11. Other Announcements
- Ad hoc IGST & cess exemption: For an armoured sedan car imported by the President’s Secretariat for the President of India.
- Restaurant clarification: Standalone restaurants cannot classify themselves as “specified premises” to pay GST at 18% with ITC.
- Lottery tickets: GST valuation rules amended to align with new tax rate.
12. Implementation Timeline
- 22 September 2025: Changes in GST rates on services and most goods.
- Pan masala, gutkha, zarda, cigarettes, unmanufactured tobacco, bidis: To continue at existing rates until cess account obligations are cleared. Transition date to be decided later.
Measures for Facilitation of Trade
The GST Council announced several steps to simplify processes, speed up refunds, and make compliance easier for businesses. Key measures include:
- Risk-Based Provisional Refunds for Exports (Zero-Rated Supplies)
- 90% of refund claims on exports (including supplies to SEZ units/developers) will be sanctioned provisionally based on system-driven risk evaluation.
- In exceptional cases, officers may conduct detailed scrutiny instead of granting provisional refunds.
- Some categories of taxpayers (to be notified) will not be eligible for provisional refunds.
- Effective from 1st November 2025.
- Refunds on Inverted Duty Structure (IDS)
- 90% provisional refund will also be extended to claims under IDS, similar to export refunds.
- CBIC will issue instructions to implement this on a risk-based system.
- Effective from 1st November 2025.
- Refunds for Low-Value Export Consignments
- The threshold limit for refunds on exports (with tax payment) will be removed under Section 54(14).
- This especially benefits small exporters using courier or postal modes.
- Simplified GST Registration for Small/Low-Risk Businesses
- Optional scheme for automated registration within 3 working days.
- Eligible if tax liability on B2B supplies does not exceed ₹2.5 lakh per month.
- Businesses can voluntarily opt in or out.
- Around 96% of new applicants will benefit.
- To be rolled out from 1st November 2025.
- Simplified Registration for Small E-Commerce Sellers
- New mechanism proposed for small suppliers selling through e-commerce operators (ECOs) across states.
- Removes the need for a separate “principal place of business” in every state.
- Final framework will be placed before the Council.
- Intermediary Services – Place of Supply Rule Changed
- Clause (b) of Section 13(8) of the IGST Act will be omitted.
- After this, the place of supply for intermediary services will be based on the recipient’s location (Section 13(2)).
- This enables Indian service providers to claim export benefits.
- Post-Sale Discounts – Clarifications & Amendments
- Section 15(3)(b)(i) of the CGST Act to be omitted (removing the need for pre-supply agreements linking discounts to invoices).
- Discounts must now be issued through credit notes under Section 34, and recipients must reverse Input tax credit where value is reduced.
- Section 34 will be amended to align with Section 15(3)(b).
- Circular No. 212/6/2024 (dated 26 June 2024) will be rescinded.
- A new circular will clarify:
- No Input tax credit reversal needed for commercial/financial credit notes.
- How dealer discounts are treated in end-customer transactions.
- Discounts provided in lieu of promotional activities.
- Retail Sale Price (RSP) Based Valuation for Tobacco Products
- Pan masala, gutkha, cigarettes, zarda, scented tobacco, and unmanufactured tobacco will be taxed on Retail Sale Price instead of transaction value.
- Amendments in CGST Rules and related notifications will be issued.
For detailed official understanding, it is advised to check the PIB release and updates on the CBIC official website
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