Two-rate GST structure approved; new rates to kick-in from Sept 22: FM

The 56th Goods and Services Tax (GST) Council meeting, chaired by Finance Minister Nirmala Sitharaman, announced on Wednesday that GST rates will be reduced to 5 per cent and 18 per cent. Most of the items useful for common man have been moved to 5 per cent slab.

"These reforms have been carried out with a focus on the common man. Every tax on the common man's daily use items has gone through a rigorous review, and in most cases, the rates have come down drastically..", the Finance Minister said.

Ultra-high temperature milk, chena and paneer have been moved to the nil bracket. The changed rates for all these items will come into effect from September 22, 2025, with an exception of tobacco items.

"All this will be effective 22 September 2025, the first day of Navratri... The changes on GST of all products except sin goods, will be applicable 22 September... Sin goods will continue at the existing rates of the GST and compensation cess, where applicable, till the loan and interest payment obligations under the compensation cess account are completely discharged... The Union Finance Minister and the Chairperson of the GST Council is authorised to decide on the actual date of the transition for these tobacco related products as soon as the loan and interest is cleared."

GST on small cars and motorcycles, which are below or equal to 350 cc has been reduced from 28 pre cent to 18 pre cent.

GST on buses, trucks, and ambulances has been reduced to 18 per cent from 28 per cent. Uniform rate of 18 per cent on all auto parts has been decided. Three wheelers will attreact 18 per cent GST instead of 28 per cent.

"Mid-size and large cars, motorcycles of engine capacity exceeding 350 cc, aircraft, helicopters and aeroplanes for personal use, yachts and other vessels for pleasure or sports, will attract 40 per cent GST."

"The long-pending inverted duty structure problem is getting corrected for the man-made textile sector by reducing the GST rate on man-made fibre from 18 per cent to 5 per cent and man-made yarn from 12 per cent to 5 per cent", the FM added.

"We are also correcting the inverted duty structure problem in the fertiliser sector by reducing GST from 18 per cent to 5 per cent on sulfuric acid, nitric acid and ammonia", Sitharaman said.

Reduction of GST from 12 per cent to 5 per cent on renewable energy devices and parts for their manufacture such as biogas plants, windmills, wind-operated electricity generators, waste to energy plants, devices, PV cells, whether or not assembled in modules or made up in panel, solar cookers, solar water heaters and systems and so on.

Meanwhile, Prime Minister Narendra Modi appriciated the efforts by GST Council and wrote on X:

"During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.

The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and strengthening the economy.

Glad to state that @GST_Council , comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women and youth.

The wide ranging reforms will improve lives of our citizens and ensure ease of doing business for all, especially small traders and businesses."