GST 2.0: Big Rate Cuts, Bigger Relief for the Middle Class, and FAQs

GST - India Tax Revamped

Introduction: Landmark GST Reforms

The 56th GST Council Meeting marks one of the most significant reform milestones in India's indirect tax regime since GST was introduced in 2017. The focus was on simplifying the tax structure and making GST more accessible and equitable for households, SMEs, and priority sectors such as agriculture, healthcare, renewable energy, and manufacturing.

Key Rate Changes

• The previous four GST slabs (5%, 12%, 18%, and 28%) have been streamlined to just two: 5% and 18%. This approach enhances transparency, reduces compliance complexity, and directly increases disposable income for families and the middle class.

• Ultra-luxury and “sin” goods (such as tobacco, large cars, and certain luxury items) will now attract a higher rate of 40%, up from 28% earlier.

Big GST rate Cuts for Daily Essentials,

• Essential items such as hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, bicycles, and household articles now see gst rate cuts, GST reduced from 18% or 12% to just 5%.

• Food items have undergone substantial relief: packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, and ghee also fall under 5% GST.

• Ultra-High Temperature (UHT) milk, prepackaged and labelled paneer (chena), and all types of Indian breads (chapati, roti, paratha, parotta) have been made tax-free (NIL GST).

• Over 30 life-saving drugs, including those for cancer and rare diseases, now see zero GST, easing costs for patients and families.

Relief on Consumer Durables and Services

• GST on electronics and consumer durables, such as air conditioners, TVs up to 32 inches, dishwashing machines, small cars, and motorcycles with up to 350 CC, has dropped from 28% to 18%, making these more affordable ahead of the festive season.

• Agricultural equipment (tractors, cultivators, composting machinery, etc.) sees GST fall from 12% to 5%, benefiting the farming community directly.

• Hotel accommodation costing ₹7,500 or less per day now faces only 5% GST, offering relief for travelers and boosting tourism.

• Personal health and life insurance premiums have been exempted from GST, making insurance policies much more affordable and improving coverage across the country.

Institutional Improvements

• The Council has recommended the operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT). GSTAT will be ready to accept appeals by September-end and start hearings by December 2025. This institutional measure promotes efficient dispute resolution, consistency in advance rulings, and greater trust in the system.

Trade Facilitation Measures

• The reforms also include improved processes for GST refunds, automated registration, and other compliance measures to make doing business easier under the GST regime.

• Correction of the long-pending inverted duty structure for textiles and fertilizers has been addressed, lowering rates on inputs to 5% to support labor-intensive sectors and MSMEs.

Socioeconomic Impact

• The reforms were driven by a focus on economic empowerment for the common man, middle class, farmers, women, and youth. By putting more money in the hands of consumers, these measures aim to boost domestic consumption, market growth, and overall ease of living, especially ahead of major festivals like Navratri and Diwali.

• These sweeping changes reflect the government’s priority of balancing revenue needs with making GST fairer and easier for all stakeholders.

Conclusion

The 56th GST Council Meeting initiates a “Next-Generation GST”—simplified, citizen-centric, and growth-oriented. With major tax relief provided to households and critical reforms improving trade facilitation, India steps into a new era of indirect taxation that promises benefits for every section of society.

Important FAQs (Based on Official CBIC Clarifications)

1. When do the new rates apply?All revised rates for goods and services (other than specified tobacco products) apply from 22nd September 2025. Tobacco-related products (like pan masala, cigarettes, bidi, zarda) will remain at existing rates until compensation cess liabilities are cleared.

2. GST threshold for registration?No change—registration thresholds under the CGST Act remain same .

3. Which notification governs these changes?A GST rate notification will be issued on the CBIC website outlining all revisions.

4. How is tax rate decided for pre-reform supplies/invoices?If supply took place before September 22 but invoice/payment issued afterward, the time of supply provisions under Section 14 determine the applicable rate.

5. What happens to Input Tax Credit (ITC)?If ITC was earned under higher rate regime, it can be utilized for future liability. However, if supply turns exempt, reversal may be required