Historic GST Tax Reforms Approved by 56th GST Council Meeting
New Delhi: The 56th GST Council meeting has approved landmark tax reforms that will benefit both businesses and the common man. Starting September 22, 2025, a two-rate GST system of 5 percent and 18 percent will replace the existing four-slab system of 5 percent, 12 percent, 18 percent, and 28 percent.
The primary goal of this reform is to reduce confusion, cut costs, support small traders, and make daily life more affordable for everyone.
Food and Essentials to Cost Less
A wide range of daily-use items will now attract lower GST rates, making essentials more affordable. Some key changes include:
- UHT milk will now be tax-free, similar to regular milk.
- Paneer, butter, ghee, cheese, and condensed milk will be taxed at 5 percent or even nil, down from 12 percent.
- Dry fruits and nuts, like almonds and cashews, will now attract 5 percent GST.
- Packaged foods such as edible oils, sausages, and namkeens will also become cheaper with the GST rate at 5 percent.
- Vegetable waters and non-sweetened aerated waters will see a GST reduction from 18 percent to 5 percent.
Healthcare Gets Cheaper
All life-saving medicines and essential medical devices will now be taxed at 5 percent or even nil in certain cases. This will significantly reduce the financial burden on patients without impacting manufacturers, who will continue to benefit from input tax credits (ITC).
Support for Agriculture and Farmers
To assist farmers, GST on fertilisers and agricultural machinery such as sprinklers, threshers, and composting machines has been lowered from 12 percent to 5 percent. This change ensures affordability for farmers while protecting domestic manufacturing, which will still be eligible for ITC.
Vehicles to Become More Affordable
- Small petrol, diesel, LPG, and CNG cars (up to 1200 cc and 4000 mm) and three-wheelers will now attract 18 percent GST, reduced from 28 percent.
- Motorcycles up to 350 cc will also be taxed at 18 percent.
- Bigger bikes and cars will continue to be taxed at 40 percent.
- Bicycles and their parts will become cheaper with GST cut from 12 percent to 5 percent.
Everyday Items Made Affordable
To ease costs for lower and middle-income families, GST rates have been reduced to 5 percent on several commonly used items, including:
- Toothpaste, toothbrushes, and dental floss
- Toilet soaps
- Face powder and shampoo
- Televisions and monitors of all sizes (now uniformly taxed at 18 percent)
- Air conditioners and dishwashers (reduced from 28 percent to 18 percent)
Insurance and Clean Energy See a Boost
GST on health and life insurance policies has been set to zero, covering individual term plans, ULIPs, endowment policies, and reinsurance. Moreover, renewable energy devices such as solar panels and wind energy systems will attract just 5 percent GST, down from 12 percent. This initiative is aimed at encouraging the adoption of green energy.
Special 40 Percent GST for a Few Products
Certain items will continue to be taxed at a higher rate of 40 percent. These include pan masala, gutkha, cigarettes, tobacco products, and carbonated sugary drinks. These goods are considered harmful or luxury items. However, the final rollout of this higher tax rate will occur once pending compensation cess loans are cleared.
Why These Changes Matter
The new GST system simplifies tax slabs, supports small businesses with easier compliance, and reduces everyday expenses for families. With uniform lower rates, improved refund mechanisms, and more affordable pricing across various sectors, India’s economy is poised for faster and fairer growth.