0% Nil Tax to 40% Sin Tax: Check the impact of GST 2.0

 Udaipur, Sept 04, 2025: The sweeping GST rate updates on September 3 has given the middle class and the common households a reason to cheer. There will be simple two tier rate structure of 5% and 18%. Have a look at the slabs and the items that have seen either a GST rate cut making them cheaper or a rate hike making them dearer. The GST Council has approved reforms with a multi-sectoral and multi-thematic focus on improving the lives of all citizens and ensuring ease of doing business for all, including small traders and businessmen.

• GST Council approves rate rationalisation with a focus on Common-man, Labour-intensive Industries, Farmers and Agriculture, Health, Key Drivers of the economy
• Exemption of GST on all individual life insurance policies whether term life, ULIP or endowment policies and reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage in the country.
• Exemption of GST on all individual health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage in the country
• Rationalisation 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
• Reduction of GST from 18% OR 12% to 5% on a host of common man items such as, hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, Bicycles, Tableware, kitchenware, other household articles, et al
• Reduction of GST from 5% to NIL on Ultra-High Temperature (UHT) milk, Prepackaged and labelled chena or paneer; All the Indian Breads will see NIL rates (Chapati or roti, paratha, parotta, etc)
• Reduction of GST from 12% OR 18% to 5% on almost all of the food items such as packaged namkeens, Bhujia, Sauces, Pasta, Instant Noodles, Chocolates, Coffee, Preserved Meat, Cornflakes, Butter, Ghee, etc.   
• Reduction of GST from 28% to 18% on Air-conditioning machines, TVs~32 inch (all TVs now at 18%), Dishwashing machines, Small cars, Motorcycles equal to or less than 350 CC
• Reduction of GST from 12% to 5% on agricultural goods, such as tractors, agricultural, horticultural or forestry machinery for soil preparation or cultivation, harvesting or threshing machinery, including straw or fodder balers, grass or hay mowers, composting machines etc
• Reduction of GST from 12% to 5% on labour intensive goods such as Handicrafts, Marble and travertine blocks, granite blocks, and Intermediate leather goods
• Reduction of GST from 28% to 18% on Cement
• Reduction of GST from 12% to NIL on 33 lifesaving drugs and medicines and from 5% to NIL on 3 lifesaving drugs & medicines used for treatment of cancer, rare diseases and other severe chronic diseases.
• Reduction of GST on all other drugs and medicines from 12% to 5%.
• Reduction of GST from 18% to 5% on various medical apparatus and devices used for medical, surgical, dental or veterinary usage or for physical or chemical analysis
• Reduction of GST from 12% to 5% on various medical equipment and supplies devices such as wadding gauze, bandages, diagnostic kits and reagents, blood glucose monitoring system (Glucometer) medical devices, etc
• Reduction of GST from 28% to 18% on Small Cars and Motorcycles equal to or below 350cc
• Reduction of GST from 28% to 18% on buses, trucks, ambulances etc
• Uniform rate of 18% on all auto parts irrespective of their HS code; Three-Wheelers from 28% to 18%
• Correction of long-pending inverted duty structure for the manmade textile sector by reducing GST rate on manmade fibre from 18% to 5% and manmade yarn from 12% to 5%
• Correction of inverted duty structure in fertilizer sector by reducing GST from 18% to 5% on Sulphuric acid, Nitric acid and Ammonia 
• Reduction of GST from 12% to 5% on renewable energy devices and parts for their manufacture
• Reduction of GST from 12% to 5% on “Hotel Accommodation” services having value less than or equal to Rs. 7,500 per unit per day or equivalent
• Reduction of GST from 18% to 5% on beauty and physical well-being services used by common man including services of gyms, salons, barbers, yoga centres, etc
• GST Council recommends operationalisation of Goods and Services Tax Appellate Tribunal (GSTAT) for accepting appeals before end of September and to commence hearing before end of December 2025
• GST Council recommends GST rates on services will be implemented with effect from 22nd September 2025

The 56th meeting of the GST Council was held in 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 measures for facilitation of trade in GST. FAQs are also being issued for clarification of doubts. The recommendations made by the 56th GST Council are as below:

A.        CHANGES IN GST RATES OF GOODS AND SERVICES

1. Recommendations relating to GST rates on goods
2. Changes in GST rates of goods

READ: What Are The Goods Impacted By the GST 2.0 Reforms in Effect From September 22, 2025 

1. Other changes relating to goods
2. It has been decided that the GST will be levied on Retail Sale Price (RSP) instead of transaction value on Pan Masala, Gutkha, Cigarettes, Unmanufactured tobacco, Chewing tobacco like Zarda.
3. It has been decided to grant ad hoc IGST and compensation cess exemption on new armoured sedan Car imported by the President’s Secretariat for the President of India.
4. Recommendations relating to GST rates on services
5. Changes in GST rates of services

Other changes relating to services

1. The Council has recommended to add Explanations to the definition of ‘specified premises’ in the context of taxability of restaurant services in order to clarify the position that a stand-alone restaurant cannot declare itself as a ‘specified premises’ and consequently cannot avail the option of paying GST at the rate of 18% with ITC.
2. The Council has recommended to align the valuation rules with the change in the tax rate applicable to lottery tickets, certain amendments in the GST Valuation rules are being carried out.
3.  Recommendation relating to date of implementation

The Council was of the view that the changes in GST rates of goods and services need to be implemented with effect from 22nd September 2025. However, keeping in view the requirement of funds to fulfill the obligation under the compensation cess account, the Council decided that the changes in GST rates may be implemented in a phased manner as follows:

1. The changes in GST rates on services will be implemented with effect from 22nd September 2025.
2. The changes in GST rates of all goods except pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi, will be implemented with effect from 22nd September 2025.
3. 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.
4. Based on c) above, Union Finance Minister and Chairperson of the GST Council may decide the actual date of transition to the revised rates of GST approved by the Council for the above-mentioned goods.
5. Pending requisite amendments in CGST Act, 2017, Central Board of Indirect Taxes and Customs (CBIC) shall administratively start implementation of the revised system of grant of  90% provisional refunds arising out of Inverted Duty structure on the basis of data analysis and risk evaluation done by the system, as in the case of risk based provisional refunds on account of zero-rated supplies.

B.  MEASURES FOR FACILITATION OF TRADE

1. Process Reforms

1. GST Council has taken various decisions and recommended various measures to facilitate trade. The process reforms and other measures related to GST law and Procedure have been defined. The date of implementation of these process reforms will be 22 September 2025.

2. 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.

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