GST Council’s 56th Meet introduces Key Slab Reforms and Tribunal Rollout — New GST Rates & FAQs Inside

On 3-9-2025, the Goods and Services Tax Council (‘GST Council’) held the 56th GST Council meeting chaired by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, marking a transformative moment in India’s tax landscape. The Council unveiled a multi-sectoral reform agenda aimed at enhancing transparency, simplifying compliance, and promoting ease of doing business, especially for small traders and entrepreneurs. The revised GST rates will come into effect from 22-09-2025. Tobacco product rates will be notified separately due to pending cess issues.

Key Highlights of GST Council 56th Meeting:

1. The Council’s recommendations encompassed revisions in GST rates for goods and services, procedural reforms, and institutional enhancements, all designed to make the GST framework more transparent, equitable, and business-friendly.

2. In terms of goods, the Council proposed significant revisions to GST rates, with detailed changes outlined in Annexure-I (HSN-wise) and Annexure-II (sector-wise). These adjustments are expected to rationalize the tax burden across industries and align rates with consumption patterns and economic priorities.

3. The Council decided to levy GST on the Retail Sale Price (‘RSP’) rather than the transaction value for products such as pan masala, gutkha, cigarettes, unmanufactured tobacco, and chewing tobacco like zarda, aimed at curbing under-invoicing and ensuring more accurate tax collection.

4. An ad hoc IGST and compensation cess exemption has been granted for the import of a new armoured sedan car by the President’s Secretariat, exclusively for the President of India.

5. The Council recommended a series of rate changes, with specifics provided in Annexure-III (HSN-wise) and Annexure-IV (sector-wise), designed to simplify compliance and bring greater uniformity to service taxation.

6. One of the key clarifications issued pertains to the definition of ‘specified premises’ in the context of restaurant services.

7. The Council emphasized that stand-alone restaurants cannot classify themselves as ‘specified premises’ and therefore are not eligible to pay GST at the rate of 18% with input tax credit (ITC). This clarification aims to eliminate ambiguity and ensure consistent tax treatment across the hospitality sector.

8. The Council recommended amendments to the GST valuation rules to align them with the revised tax rate applicable to lottery tickets, thereby enhancing procedural coherence and reducing interpretational disputes.

9. To ensure a seamless transition and uphold fiscal prudence, the GST Council adopted a phased rollout of the proposed reforms. The first phase, effective 22-9-2025, will implement:

   • GST rate changes on services, and

   • GST rate changes on goods, excluding tobacco and pan masala products.

10. CBIC will begin administrative implementation of 90% provisional refunds for inverted duty structures using data analytics and risk evaluation, pending legislative amendments.

11. The Council also focused on measures to facilitate trade and improve the ease of doing business.

12. A major institutional reform announced during the meeting was the operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT). The Tribunal will begin accepting appeals by the end of September 2025 and commence hearings by December 2025.

13. The Council has set a deadline of 30-6-2026 for filing pending cases, to address the backlog of appeals.

14. The Principal Bench of the GSTAT will also serve as the National Appellate Authority for Advance Ruling, thereby ensuring consistency in rulings and providing greater legal certainty to taxpayers

15. Overall, the 56th GST Council meeting reflects a strategic recalibration of India’s GST framework, aligning it with evolving economic conditions and stakeholder needs.

Access the detailed recommendations of the 56th GST Council meeting, on SCC Online.

Key Measures for Facilitation of Trade recommended by GST Council 56th Meeting:

1. The Council approved risk-based provisional refunds for zero-rated supplies, allowing 90% refund upfront, effective from 1-11-2025.

2. Similar provisional refund mechanism was extended to inverted duty structure cases, pending CGST Act amendment.

3. Refund threshold for low-value export consignments will be removed, benefiting small exporters using courier/postal modes.

4. A simplified GST registration scheme for small, low-risk businesses will enable automated registration within 3 days.

5. A new registration mechanism for small e-commerce suppliers across states was approved in principle to ease compliance.

6. The place of supply for intermediary services will now be based on the recipient’s location, aiding Indian service exporters.

7. Post-sale discount provisions were simplified, removing pre-agreement requirements and enabling credit note-based adjustments.

8. Clarifications on post-sale discounts will reduce disputes, covering ITC treatment and promotional considerations.

9. Retail sale price-based valuation will now apply to tobacco and pan masala products, replacing transaction value.

10. These reforms aim to streamline procedures, reduce litigation, and enhance ease of doing business under GST.

New GST Rates

Discover the complete list of GST rates on goods and services imposed following the GST Council’s recommendations, read it all on SCC Online. A few key updates are listed below:

GOODS:

Description of Item	GST Rate Reduced
Ultra-High Temperature (UHT) Milk	Nil
Condensed Milk	5%
Butter/Oil/ dairy Spreads/ Cheese	5%
Paneer	Nil
Dried Nuts	5%
Brazilian Nuts	5%
Citrus Fruits	5%
Fish Oils	5%
Margarine	5%
Sausages	5%
Caviar	5%
Chocolates	5%
Bakery Items	5%
Pizza Bread	Nil
Frozen Vegetables (made with vinegar/acetic acid)	5%
Jams	5%
Ice Cream	5%
Diabetic Foods	5%
Packed Drinking Water	5%
Plant Based/Soy Milk	5%
Bidis	18%
Cement	18%
Talcum Powder	5%
Hair Oil and Shampoo	5%
Toothpaste/Floss/ Tooth Powder	5%
Shaving Products	5%
Toilet Soap	5%
Candles	5%
Feeding Bottles/ Nipples	5%
Handbags	5%
Tableware/Kitchenware	5%
Handicraft Wood	5%
Hand-made Paper	5%
Notebooks	Nil
Carpets	5%
Handmade Shawls	5%
Solar water system	5%
TV/AC	18%
Fuel Cell Motor Vehicles	5%
Tractors	5%
Road tractors for semi-trailers	18%
Three Wheeled Vehicles	18%
Bicycles	5%
Glucometer	5%
Lenses	5%
Malts	5%
Cereals/ Corn Flakes	5%
Sugar	5%
Coffee	5%
Solar Cookers	5%
Anaesthetics	5%
Spectacles	5%
Thermometers/ Drugs and medicines for personal use	5%
Geometry/Colour Boxes	5%
Walkie talkie	5%
Granite	5%
Food preparations	5%

GST Rates Increased

Description of Item	GST Rate Increased
Pan Masala	40%
Aerated Water	40%
Non-Alcoholic Beverages	40 %
Carbonated/ Caffeinated Beverages	40 %
Tobacco	40 %
Coal	18%
Peat	18%
Motor Cars	40%
Motor vehicles with both spark-ignition	40%
Motorcycles of engine capacity exceeding 350 cc	40%
Personal Aircraft/Yacht	40%
Revolvers and pistols	40%

IGST which became NIL

Description	Revised GST Rate
Technical Documents Natural cut Diamonds Antiques Military transports Communication devices	Nil

SERVICES

Description of Item	Revised GST Rate
Contract Composite works	12%-18%
Hotels with 7500 per day	12%- 5%
Transport of goods by GTA	5% (RCM/FCM) 12%-18% with ITC
Transport of Goods by Railways	12%- 5% (without ITC) & 18% (ITC)
Supply of Service of third-party insurance	12%-5%
Casinos or race clubs, or sporting events like the IPL	28%- 40%
Beauty and physical well-being services	18%-5%
Specified Actionable Claims (betting, casinos, gambling, horse racing, lottery, online money gaming)	28%- 40%
Life insurance/ Health insurance	18%- Exempt

GST Rates Unchanged

Category	Description of Items
Goods	Knitted Apparels, not above ₹2500 Apparels, not above ₹2500 Footwear, above ₹2500
Services	Local Delivery Services

Top 25 FAQs from the 56th GST Council Meeting

Finance Ministry has issued a compilation of Frequently Asked Questions (FAQs) pertaining to the key decisions taken during the 56th meeting, few are as under:

1. What major GST reforms were announced in the 56th Council Meeting, and when will they be implemented?

The 56th GST Council Meeting introduced sweeping changes to simplify and modernize the tax system:

• New slab structure: GST now revolves around two core rates——5% and 18%——replacing the older 12% and 28% slabs.

• 40% rate introduced for sin and luxury items like tobacco, pan masala, luxury SUVs, and sugary drinks.

• Digital GST 2.0: AI-powered invoice matching, auto-filled returns, and faster export refunds.

• Uniform tax rules rolled out for sectors like e-commerce, drones, online gaming, medical devices, and insurance.

• Inverted duty fixes in textiles, footwear, and fertilizers.

• State Compensation Cess extended through March 2026.

  These revised GST rates will take effect from 22-9-2025.

2. What change was made to GST rate slabs?

The Council merged slabs into 5%, 18%, and 40% rates to simplify the structure.

3. Has the registration threshold under the CGST Act changed?

No changes were made. Businesses must register under GST if their turnover exceeds ₹20 lakh (₹10 lakh for special category states). This maintains consistency and avoids disruption for small enterprises.

4. Is UHT milk taxable under GST now?

No, UHT (Ultra High Temperature) milk is now exempt from GST, aligning it with other milk products. This supports the dairy industry and reduces consumer costs.

5. What is the new GST rate for plant-based milk drinks like soya milk?

The GST rate has been reduced to 5%. This promotes sustainable and healthier alternatives and brings parity with traditional dairy products.

6. What is the GST rate on small cars after the meeting?

The rate has been reduced from 28% + cess to 18%, making entry-level vehicles more affordable and stimulating growth in the automobile sector.

7. What is the GST rate on IPL and similar entertainment events?

Admission to IPL matches and similar commercial entertainment events is now taxed at 40% GST, reflecting their luxury status. In contrast, tickets to recognized sporting events priced at ₹500 or less are exempt.

8. What is the GST rate on daily-use items like shampoo and toothpaste?

Essential personal care items like shampoo, toothpaste, and soap bars now attract a 5% GST rate, down from 18%, making them more affordable for everyday consumers.

9. What is the revised GST rate on agricultural machinery?

The rate has been reduced from 12% to 5%, lowering costs for farmers and encouraging mechanization in agriculture. This supports rural development and food security.

10.Whether the same option of two rates is available to transport of passenger by air?

No such option is available for transport of passenger by air i.e. if travel is by economy class then rate of GST is 5% otherwise the GST rate will be 18%.

11. What are the new GST rates on tobacco and alcohol?

Tobacco products and alcohol now fall under a special 40% GST slab, categorized as sin goods. This is a significant increase aimed at discouraging consumption and boosting revenue.

12. What will be the impact on the IGST rate on import of goods?

The IGST on imported goods will be the GST rates as notified in the rate notification except where IGST rate has been exempted separately.

13. What is the GST status on health and life insurance policies?

All individual health and life insurance policies including term life, ULIPs, endowment plans, and family floaters are now exempt from GST. This is a major relief for the common man and aims to increase insurance penetration across India.

14. What relief was given to labour-intensive industries?

GST on handicrafts, marble blocks, granite, and intermediate leather goods has been reduced from 12% to 5%.

15. What is the revised GST rate for electronics and appliances?

The GST rate on select household electronics, such as televisions up to 32 inches, air conditioners, dishwashers, and refrigerators, has been reduced from 28% to 18%. This revision lowers consumer costs and is expected to stimulate demand in the appliance sector.

16. Should revised GST rates be applied to stock held before the rate change?

Yes. GST is levied at the time of supply. If goods or services are supplied on or after the effective date of the revised rates, the new GST rate must be applied, regardless of when the stock was acquired.

17. Are cancellation and regeneration of e-way bills required for goods already in transit when GST rates change?

No. As per Rule 138 of the CGST Rules, 2017, e-way bills must be generated before the commencement of goods transport. Goods already in transit when the new rates take effect do not require cancellation or regeneration of e-way bills. Existing bills remain valid for their originally assigned duration.

18. Why are most medicines taxed at 5% GST instead of being fully exempt?

Medicines attract a concessional GST rate of 5%, except those specifically listed at nil rate, to allow manufacturers to claim input tax credit on raw materials. Full exemption would block this credit, raise production costs, and potentially lead to higher prices for consumers, making exemption counterproductive.

19. Currently mid-size and big cars attract 28% GST and compensation cess ranging from 17-22% with the overall tax incidence ranging from 45-50%. What will be the new rate?

The new GST rate on mid-size and big cars will be 40% with no compensation cess.

20. What is the revised GST rate on small cars and larger or utility vehicles?

• Small cars, Petrol, LPG, or CNG vehicles with engine capacity up to 1200 cc and length up to 4000 mm, and Diesel vehicles with engine capacity up to 1500 cc and length up to 4000 mm, now attract a reduced GST rate of 18% (down from 28%).

• Vehicles exceeding 1500 cc or length over 4000 mm, including Utility Vehicles such as SUVs, MUVs, MPVs, and XUVs with ground clearance of 170 mm or more, are taxed at a GST rate of 40%, with no additional cess.

21. Why is the 40% GST referred to as a ‘special rate’ and what determines its application?

The 40% rate is termed a special rate as it applies only to select goods, mainly sin goods and luxury items, that previously attracted Compensation Cess in addition to GST. With the cessation of the cess, its rate has been merged into GST to maintain overall tax incidence. For other goods and services already taxed at the highest slab of 28%, the special rate ensures continuity in effective taxation.

22. Why not exempt job work from GST entirely?

Full exemption breaks the input tax credit (ITC) chain, raising costs——especially in sectors with multiple job-work layers. A 5% GST rate with ITC ensures credit flow and prevents tax cascading.

23. Do lottery, betting, gambling, and casinos attract 40% GST?

Yes. Betting, gambling, horse racing, lottery, casinos, and online money gaming are taxed at a 40% GST rate as actionable claims.

24. Will States be compensated for revenue loss?

No compensation announced; states have raised concerns.

25. What change was made to GST registration for small businesses?

A simplified registration scheme will be introduced from 1-11-2025, allowing automated approval within 3 working days for applicants with monthly output tax liability up to ₹2.5 lakh. This covers nearly 96% of new registrants, easing compliance for small and low-risk businesses.

Read the complete set of FAQs on SCC Online