56th GST Council Meeting makes key changes in GST rates for goods and services

The 56th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, concluded today with significant recommendations aimed at simplifying the GST regime and providing relief to consumers. The key decisions involve a major rationalization of GST rates on various goods and services, as well as crucial procedural reforms.

Key Decisions and Rate Reductions

• The council approved widespread GST rate cuts on numerous goods, primarily reducing rates from 18% and 12% to 5%. This move is expected to directly benefit consumers by lowering the cost of essential and everyday items.

• 18% to 5%: A broad range of goods will now attract a lower 5% GST. These include ice cream, chocolates, dental products (toothpaste and floss), hair care products (shampoo and oil), and toilet soaps. Additionally, several medical and industrial goods such as medicinal-grade oxygen, sulphuric acid, and nitric acid have also been moved to the lower tax bracket.

• 12% to 5%: Many food items, including condensed milk, butter, cheese, most dried nuts and fruits, and sauces, will now be taxed at 5%. The rate on pre-packaged drinking water in 20-litre bottles has also been reduced.

• 28% to 18%: In a notable change for the construction sector, the GST on Portland cement has been reduced from 28% to 18%.

• Exemptions (5% to Nil): Certain pre-packaged items, including UHT milk, paneer, and Indian breads like khakhra, chapati, and roti, will now be fully exempt from GST.

Phased Implementation and Procedural Changes

While most GST rate changes for goods and services are set to take effect on September 22, 2025, some changes will be implemented in a phased manner.

Tobacco and Pan Masala: The GST on products like pan masala, gutkha, and cigarettes will now be levied on their Retail Sale Price (RSP) instead of the transaction value. However, the existing GST and compensation cess rates on these products will remain unchanged until the government fully repays its compensation cess-related loans. The Finance Minister will announce the exact date for the new tax system on these goods later.

Appellate Tribunal (GSTAT): To enhance the dispute resolution mechanism, the council announced that the Goods and Services Tax Appellate Tribunal (GSTAT) will begin accepting appeals by the end of September and commence hearings by the end of December 2025. This is a crucial step towards providing a robust and certain legal framework for taxpayers.

The recommendations signal a concerted effort by the government to simplify the tax structure, provide relief to the common man, and improve the overall ease of doing business under the GST regime.