Analysis Of 56th GST Council Meeting
The GST Council’s recent proposals in the meeting dated 03-09-2025 underline the Government’s commitment to building a simpler, transparent, and growth-oriented tax framework.
Together, these initiatives mark a comprehensive reform package reducing costs, providing legal clarity, and strengthening institutional mechanisms. By balancing economic stimulus with compliance ease, the reforms reinforce GST’s role as a cornerstone of India’s growth and ease of doing business.
The proposed announcements made by the 56th Meeting of the GST Council are outlined as below:
Changes in GST Rates of Goods and Services
Date of Implementation
The revised GST rates on services and goods (other than Pan Masala, Gutkha, Cigarettes, Chewing Tobacco products such as Zarda, Unmanufactured Tobacco, and Bidi) will come into effect from 22-09-2025.
For 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.
Recommendations relating to GST rates on goods:
- Rationalization of the current 4-tiered tax rate structure into a citizen-friendly ‘Simple Tax’ – a 2 rate structure with a Standard Rate of 18% and a Merit Rate of 5%;a special de-merit rate of 40% for a select few goods and services.
- This includes a detailed annexure of HSN-wise and sector-wise rate changes.
- It is recommended to introduce GST on Retail Sale Price (RSP) for Pan Masala, Gutkha, Cigarettes, Unmanufactured tobacco, Chewing tobacco like Zarda instead of transaction value, and
- Granting ad hoc IGST and compensation cess exemption on a new armoured sedan Car imported for the President of India.
- A concise industry-wise list showing the Existing GST rate vs. Proposed GST rate as per the 56th GST Council recommendations is as follows-
Agriculture & Food Processing
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Ultra-High Temperature (UHT) Milk | 5% | Nil |
| Condensed Milk | 12% | 5% |
| Butter, Ghee, Dairy Spreads | 12% | 5% |
| Cheese | 12% | 5% |
| Chena / Paneer (Pre-packaged & Labelled) | 5% | Nil |
FMCG & Household Essentials
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Hair Oil, Shampoo, Soap Bars, Toothpaste, Toothbrushes | 18% / 12% | 5% |
| Packaged Namkeens, Bhujia, Sauces, Pasta, Instant Noodles, Chocolates, Coffee | 12% / 18% | 5% |
| Tableware, Kitchenware, Household Articles | 12% / 18% | 5% |
Agriculture Machinery
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Tractors & Agricultural Machinery (Soil preparation, Harvesting, Threshing, etc.) | 12% | 5% |
Handicrafts & Labour-intensive Industries
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Handicrafts, Marble & Granite Blocks, Intermediate Leather Goods | 12% | 5% |
Infrastructure & Construction
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Cement | 28% | 18% |
| Sand lime bricks or Stone inlay work | 12% | 5% |
Electronics & Consumer Durables
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Air Conditioners, TVs (all sizes), Dishwashing Machines | 28% | 18% |
Automobile Sector
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Small Cars (< 1200 cc/1500 cc) & Motorcycles (≤ 350 cc) | 28% | 18% |
| Buses, Trucks, Ambulances | 28% | 18% |
| Small Cars (> 1200 cc/1500 cc) & Motorcycles (> 350 cc) | 28% | 40% |
| Aircraft for personal use | 28% | 40% |
Healthcare & Pharmaceuticals
| Goods | Existing Rate | Proposed Rate |
|---|---|---|
| Lifesaving Medicines (33 drugs at 12%) | 12% | Nil |
| Lifesaving Medicines (3 drugs at 5%) | 5% | Nil |
| Other Medicines & Drugs | 12% | 5% |
| Medical Devices (Surgical, Dental, Veterinary instruments, Diagnostic Kits, Glucometers) | 18% | 5% |
| Medical Consumables (Bandages, Cotton, Wadding, Gauze, Diagnostic Reagents) | 12% | 5% |
Recommendations relating to GST rates on services:
- This section also refers to HSN-wise and sector-wise rate changes in annexures.
- Exemption of GST on all individual life insurance policies whether term life, ULIP or endowment policies and reinsurance thereof.
- Exemption of GST on all individual health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof.
- Other changes involve clarifying the definition of ‘specified premises’ for restaurant services to prevent stand-alone restaurants from availing the 18% GST rate with Input Tax Credit (ITC).
- Industry-wise GST Rate Changes – Services (Illustrative, with ITC details)
Insurance Services
| Service | Existing Rate | Proposed Rate |
|---|---|---|
| Life Insurance (Term, ULIP, Endowment) | 18% (With ITC) | Nil (Exempt – No ITC) |
| Health Insurance (Individual, Family, Senior Citizens) | 18% (With ITC) | Nil (Exempt – No ITC) |
| Reinsurance of Life & Health Policies | 18% (With ITC) | Nil (Exempt – No ITC) |
Hospitality & Food Services
| Service | Existing Rate | Proposed Rate |
|---|---|---|
| Standalone Restaurants | 5% (Without ITC) | 5% (Without ITC – clarification, cannot opt for 18% with ITC) |
| Hotel Accommodation (Tariff < ₹7,500 per night) | 12% (With ITC) | 5% (Without ITC) |
Transportation Services
| Service | Existing Rate | Proposed Rate |
|---|---|---|
| Supply of Air transport of passengers in other than economy class | 12% (With ITC) | 18% (With ITC) |
| Goods Transport Agency (GTA – forward charge) | 12% (With ITC) | 18% (With ITC) |
Tourism & Travel
| Service | Existing Rate | Proposed Rate |
|---|---|---|
| Supply of Renting of any motor vehicle | 12% (With ITC) | 18% (With ITC) |
| Supply of Passenger transport by any motor vehicle | 12% (With ITC) | 18% (With ITC) |
Other Services
| Service | Existing Rate | Proposed Rate |
|---|---|---|
| Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less | 12% (With ITC) | 5% (With ITC) |
| Beauty and physical well-being services falling under group 99972 | 18% (With ITC) | 5% (Without ITC) |
| Admission to casinos, race clubs, any place having casinos or race clubs, or sporting events like the IPL | 28% (With ITC) | 40% (With ITC) |
Change in Rate of Tax: Key Points
Impact of Change of Tax Rates
As per Section 14 of the CGST Act, 2017, when there is a change in the rate of tax, the determination of applicable rate depends on whether supply, invoice issuance, and payment occur before or after the rate change.
| Type | Scenario | Invoice Date | Payment Date | Time of Supply (Applicable Rate) |
|---|---|---|---|---|
| Supply Before Rate Change | Supply before rate change | After change | After change | Earlier of Invoice/Payment → New Rate |
| Supply before rate change | Before change | After change | Invoice Date → Old Rate | |
| Supply before rate change | After change | After change | Payment Date → New Rate | |
| Supply After Rate Change | Supply after rate change | Before change | Before change | Earlier of Invoice/Payment → Old Rate |
| Supply after rate change | Before change | After change | Payment Date → New Rate | |
| Supply after rate change | After change | Before change | Invoice Date → New Rate |
Applicability on Credit & Debit Notes
Applicability on Credit & Debit Notes
- If supply made before rate change and later a credit note is issued (e.g., discount, sales return, price reduction):
Old GST rate (rate on original invoice date) continues to apply. - If supply made after rate change → New GST rate applies.
- Reason:
Credit note adjusts tax liability linked to the original invoice. It does not reopen/change the applicable rate of supply.
Debit Note (Upward Revision)
- If supply made before rate change but a debit note is issued later (e.g., price increase, supplementary billing):
Old GST rate (rate on original invoice date) applies. - If supply made after rate change → New GST rate applies.
- Reason:
As per Sec. 34(3), CGST Act, a debit note is deemed part of the original invoice. Hence, GST rate follows the date of original supply.
Impact of Wrong Tax Charged in the invoice
If the wrong rate is charged on invoice:
- Short payment of GST – Liability to pay differential tax along with interest.
- Excess collected GST – Needs to be deposited with the government (cannot be retained).
Measures for Facilitation of Trade
Various decisions and measures have been recommended to facilitate trade. These include:
- Sanction of risk-based provisional refunds for claims arising from zero-rated supply with 90% of the refund sanctioned provisionally based on system analysis within Seven working days. These provisions are scheduled to be operational from 1st November 2025.
- Recommendation for risk-based provisional refunds arising out of inverted duty structure (IDS). Provisional sanction of 90% of refund claims arising out of an inverted duty structure (‘IDS’), similar to the mechanism currently applicable for refunds on zero-rated supplies. These provisions are scheduled to be operational from 1st November 2025.
- Amendment in CGST Act for GST Refunds on low-value export consignments by removing the threshold limit of claim amount is less than Rs.1000/- per tax head, particularly benefiting small exporters using courier or postal modes.
- Simplified GST Registration Scheme for Small and Low-Risk Businesses, Whose self-assessed monthly output tax liability on supplies to registered persons does not exceed ₹. 2.5lakh (inclusive of CGST, SGST/UTGST, and IGST) allowing automated registration within three working days for certain applicants. This is also to be operational from 1st November 2025.
- Simplified Registration Scheme for small suppliers through electronic commerce operators (ECOs). It is recommended to introduce a simplified GST registration mechanism for small suppliers making supplies through E-commerce Operators (‘ECOs’) across multiple states, as such suppliers currently face significant challenges in maintaining a Principal Place of Business (‘PPoB’) in every state.
- Amendment in place of supply provisions for intermediary services under section 13(8) of the IGST Act, to determine the place of supply based on the recipient’s location, helping Indian exporters claim export benefits.
- Amendments and clarifications on Post Sale Discount
- It is recommended to amend Section 15 and Section 34 of the CGST Act with respect to post-sale discounts.
- The Council has recommended to issue a clarification on the treatment of post-sale discounts, including:
- Non-reversal of ITC in cases where discounts are given through financial/commercial credit notes,
- Whether post-sale discounts provided by manufacturers to dealers constitute additional consideration in the transaction between dealers and end-customers, and
- Whether post-sale discounts should be treated as consideration for promotional activities undertaken by dealers.
- Operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT):
The GSTAT is expected to be operational for accepting appeals by the end of September and commence hearings by the end of December 2025. It will also serve as the National Appellate Authority for Advance Ruling, strengthening dispute resolution and enhancing certainty for taxpayers.
Conclusion
The 56th GST Council meeting represents a watershed moment in India’s indirect tax regime. By rationalising GST slabs into a simplified two-rate structure, granting exemptions on critical sectors like healthcare and insurance, and reducing rates on essential goods and services, the Council has aligned GST with the twin goals of ease of compliance and consumer welfare.
At the same time, stricter norms for demerit goods, and faster refund mechanisms reflect the Government’s resolve to balance revenue protection with trade facilitation.
For businesses, the message is clear – the GST landscape is moving toward simplicity, transparency, and digital compliance. Companies should revisit their contracts, invoicing, and ITC positions to align with the new framework effective 22nd September 2025.