TFP Bureau, New Delhi, September 3, 2025 – In a historic decision set to impact every household and business across the country, the 56th meeting of the Goods and Services Tax (GST) Council approved sweeping reforms in line with Prime Minister Narendra Modi’s Independence Day call for a “Next-Generation GST.” The meeting, chaired by Union Finance Minister Nirmala Sitharaman, focused on making GST more citizen-friendly, reducing rates on essential commodities, and simplifying the tax structure for long-term economic stability.
The Council endorsed a comprehensive overhaul of the GST framework with the guiding principle of benefitting the common man, labour-intensive sectors, agriculture, healthcare, and small businesses. The reforms include major tax rationalisations, exemptions, and steps to correct long-pending inverted duty structures across several industries.
Simpler Tax Structure
One of the most significant changes approved is the rationalisation of the current four-tier GST rate system into a simpler two-rate framework: a standard rate of 18% and a merit rate of 5%. Additionally, a de-merit rate of 40% will continue to apply to a select few luxury or sin goods. This simplification is expected to make compliance easier for traders and businesses while bringing more transparency to the system.
Relief on Insurance and Healthcare
For the first time, all individual life insurance and health insurance policies—including family floater and senior citizen policies—will be exempted from GST. Reinsurance for these policies will also be exempt. Officials said this move would make insurance more affordable and expand coverage, thereby helping citizens access better financial protection and healthcare facilities.
In a move that will directly benefit patients, GST on 33 life-saving drugs and medicines has been reduced from 12% to NIL, while three critical drugs for cancer and rare diseases have seen GST cut from 5% to NIL. All other drugs and medicines will now attract only 5% GST instead of 12%. In addition, medical equipment such as bandages, diagnostic kits, blood glucose monitoring devices, and surgical tools will now be taxed at 5% instead of higher rates.
Everyday Essentials Get Cheaper
The Council announced sweeping reductions on several household items. GST on hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, kitchenware, and tableware has been slashed from 12% or 18% to just 5%. Ultra-High Temperature (UHT) milk, paneer, and all Indian breads such as chapati, paratha, and parotta will now attract NIL GST.
Food products like namkeens, sauces, pasta, noodles, chocolates, coffee, cornflakes, ghee, butter, and preserved meats will see their GST reduced to 5%, making packaged foods significantly more affordable for middle-class families.
Agriculture and Labour-Intensive Sectors Gain
Agricultural machinery—including tractors, threshers, and composting machines—will now be taxed at 5% instead of 12%. This is expected to provide a direct boost to farmers. Handicrafts, marble and granite blocks, and intermediate leather goods will also benefit from a reduced 5% GST, offering relief to artisans and workers in labour-heavy industries.
Major Industrial Reforms
The Council corrected long-standing inverted duty structures in key sectors. In the textile industry, GST on man-made fibre has been cut from 18% to 5% and on man-made yarn from 12% to 5%. Fertilizer inputs such as sulphuric acid, nitric acid, and ammonia will also attract just 5% GST, ensuring lower costs for farmers and fertilizer companies.
For construction and infrastructure, GST on cement has been reduced from 28% to 18%, a move likely to lower building costs and boost housing affordability.
Relief on Automobiles and Consumer Goods
GST on two-wheelers up to 350cc and small cars has been reduced from 28% to 18%, alongside similar cuts for buses, trucks, and ambulances. Auto parts will now face a uniform 18% GST, replacing the earlier multiple-rate system. Air conditioners, televisions up to 32 inches, and dishwashers will also now fall under the 18% bracket, down from 28%.
Boost for Tourism and Services
To promote tourism and hospitality, GST on hotel stays costing up to ₹7,500 per night has been slashed from 12% to NIL. Services such as gyms, salons, yoga centres, and barbershops will also see GST reduced from 18% to 5%, making them more accessible for the middle class.
Strengthening GST Infrastructure
The Council also approved the operationalisation of the long-awaited Goods and Services Tax Appellate Tribunal (GSTAT), which will start accepting appeals by the end of September and commence hearings by December 2025. This is expected to streamline the resolution of tax disputes and improve trust in the GST system.
GST rate changes on services will officially come into effect from September 22, 2025. FAQs and clarifications will be issued by the Ministry of Finance to help taxpayers adapt smoothly to the changes.
A Milestone for Reforms
Officials described the reforms as one of the most ambitious overhauls since GST was first introduced in 2017. By reducing tax rates on essentials, correcting duty structures, and simplifying compliance, the Council aims to strengthen the tax framework while providing tangible benefits to citizens and businesses alike.
The decisions mark a decisive step towards the government’s vision of a “Simple Tax” system, ensuring both social equity and economic growth. Experts believe these changes will not only boost consumption but also improve compliance, thereby increasing revenue in the long run.
With reforms touching everything from medicines and agriculture to consumer goods and tourism, the 56th GST Council meeting is being hailed as a transformative moment in India’s economic journey.
Chhattisgarh’s Stand: GST reforms beneficial for common people and business world – Finance Minister O.P. Choudhary
Representing Chhattisgarh at the 56th GST Council meeting in New Delhi, Finance Minister O.P. Choudhary emphasised that the newly announced reforms would significantly benefit both ordinary citizens and the business community. He noted that the proposed measures are not limited to simplifying the tax structure but will also accelerate economic activity, ensure financial stability, and improve the ease of doing business across states.
Choudhary highlighted that many critical issues related to strengthening the GST system were thoroughly discussed at the meeting. He stressed that the reforms—ranging from tax relief on essential goods to support for agriculture and healthcare—would directly improve lives while energising the nation’s economic engine.
He further remarked that these steps are aligned with Prime Minister Narendra Modi’s Independence Day call for comprehensive GST reform and that today’s meeting marks a concrete step towards realising that vision.
The session was attended by Chief Ministers and Finance Ministers from various states, senior Revenue Department officials, members of the Central Board of Indirect Taxes and Customs (CBIC), and top Finance Ministry representatives.
Choudhary reiterated Chhattisgarh’s commitment to contributing actively to these reforms, underlining that they will particularly help states like Chhattisgarh by boosting trade, strengthening state finances, and ensuring that the benefits of a simplified GST reach the last mile.
