Latest GST News: Big Relief GST Rates reduced in India

The GST was implemented in 2017 with the promise of being a one nation, one tax. However, it was a game of four slabs and endless confusion. From tax slabs 5%, 12%, 18%, and 28%, plus cess on sin goods, businesses and consumers were forced to do hard maths and stayed confused. However, this has now changed. The 56th GST Council meeting (3–4 September, New Delhi) marked the biggest reset since the launch of GST. It is being hailed as GST Relief as there are now simpler slabs, cut rates, expanded exemption plus easier compliances. Everything new from GST Relief will be implemented starting from 22 September 2025. Let’s dive deep into it.

The Core of Latest GST Relief Reform

Two Slabs Only: 5% and 18% (instead of 5%, 12%, 18%, 28%).
Sin/Luxury Goods: Stuck with 40% demerit rate, plus cess, until compensation debt cleared.
Life & Health Insurance: Made GST-free.
Essentials & Medicines: Shifted to 0% or 5%.
Consumer Goods & Services: Large-scale rate cuts to boost demand.

Comparison of Old vs. New GST Rates

Category / Item	Old Rate(s)	New Rate (Sep 22, 2025 onwards)
Household essentials (bread, soap)	12–18%	5% or Nil
Medicines (including lifesaving drugs)	5–12%	Nil / 5%
Consumer durables (TVs, ACs, small cars, cement)	28%	18%
Farm machinery	12%	5%
Handicrafts, marble, leather goods	12%	5%
Manmade fibres, yarn, textiles	12–18%	5%
Fertiliser inputs (acids, ammonia)	18%	5%
Renewable energy equipment	12%	5%
Hotels (<₹7,500/night)	12%	5%
Beauty & wellness services	18%	5%
Life & Health insurance (individual)	18%	Nil
Sin goods (tobacco, aerated drinks, luxury cars, private jets)	28% + cess	40% demerit rate

Why was the GST Relief Reform Launched?

The council has claimed the latest GST relief reforms are the “Next Generation GST” and are aimed at:

Boosting demand: Lower GST means cheaper goods, encouraging spending.
Simplifying compliance: Two slabs are easier for businesses to manage.
Relieving households: Essentials, medicines, insurance—now less burdened.
Supporting MSMEs & farmers: Machinery and raw materials moved to lower brackets.
Stimulating sectors: Housing, textiles, hospitality, and wellness given a push.

Important GST Relief Reforms for Compliance

The 56th GST Council Meeting didn’t just cut GST Rates. It is also upgrading administrative processes:

Auto-refunds for exporters and small businesses.
Prefilled returns to reduce errors and paperwork.
One-stop registration for sellers across multiple states.
GSTAT (Goods and Services Tax Appellate Tribunal) rollout:
Appeals accepted by September 2025.
Hearings started by December 2025.
Backlog cap aimed for June 2026.

This meant fewer headaches for businesses, tax experts and fewer excuses for tax evasion.

Political and Public Reactions on GST Relief Reforms

Finance Minister Nirmala Sitharaman called it a “Diwali gift”, echoing her Independence Day hint.
State leaders across Bihar, Arunachal Pradesh, and others praised the move as consumer-friendly.
Social media called it “0 to 100,” with memes celebrating cheaper essentials.
Markets treated it as bullish news, expecting consumption-driven growth.

Who and What are the benefits of GST Relief Reforms?

Households: Cheaper groceries, medicines, soaps, and insurance relief.
Middle class: TVs, ACs, and cars got more affordable.
Farmers: Lower tax on fertiliser inputs and machinery.
Small businesses: Easier compliance and lower cost of operations.
Textile sector: Yarn and fibres moved to 5%, boosting competitiveness.
Hospitality & wellness: Hotels and beauty services taxed at 5%.

Who is still paying the maximum price?

State governments: They feared massive revenue shortfalls.
Consumers of sin goods: Tobacco, pan masala, and luxury cars faced higher or unchanged taxes.
High-end industries: Aviation, luxury automobiles, and aerated drinks stayed heavily taxed.

Timeline Snapshot for GST Relief Reform

Date	Event
2017	GST rolled out (5%, 12%, 18%, 28%)
Aug 15, 2025	PM hinted at a Diwali gift in speech
Sep 3–4, 2025	56th GST Council Meeting held
Sep 22, 2025	New GST rates became effective

Broader Economic Impact of GST Relief Reform

Inflation will be little less as essentials will be cheaper.
Consumption will likely rise in FMCG, textiles, housing and auto sales.
MSMEs will enjoy a simple compliance system.
Nil GST will encourage more adoption of life and health policies.
The renewable energy equipment will be cheaper and will align with climate goals.

Some Challenges that GST Relief Reform May Bring

Revenue loss might force higher borrowing or spending cuts.
States could demand extra compensation, reviving old GST disputes.
Some industries (like alcohol, petroleum) still sat outside GST, so the “one tax” dream remained incomplete.

Conclusion

In conclusion, The GST 2025 reform was easily the boldest tax reset since its 2017 debut. By shrinking four slabs to two, expanding zero-tax goods, exempting insurance, and simplifying compliance, the Council aimed to fuel consumption, ease inflation, and put more money in people’s pockets.

FAQs

Q1. From when are the new GST rates applicable?
The revised GST structure is applicable from 22nd September 2025. Exceptions: cigarettes, chewing tobacco, zarda, unmanufactured tobacco, and beedis will continue under the old rate until cess loans are repaid.

Q2. Do GST registration thresholds change under GST reform?
No, GST registration thresholds remain unchanged.

Q3. Where can I find official GST notifications?
All revised rates and GST changes will be notified on the CBIC website.

Q4. How is GST applied if supply/payment crosses the date of rate change?
The applicable rate depends on the time of supply under Section 14 of the CGST Act. The invoice/payment date will decide which GST rate applies.

Q5. Will Input Tax Credit (ITC) be impacted by GST relief changes?

Existing ITC already availed continues.
If a supply becomes exempt after 22nd September 2025, ITC reversal is required.
Refund of ITC is not allowed simply because of rate reduction.

Q6. How does GST reform affect imports?
Imports will be taxed under the revised IGST rates, unless specifically exempted.

Q7. What GST relief is given on essential food items?

Exempt under GST: UHT milk, Indian breads, unpackaged paneer, natural honey.
5% GST: Plant-based milks, soya milk, packaged paneer.

Q8. What is the GST rate for medicines and medical devices?
GST rate on medicines and medical devices reduced to 5%. This is a major GST relief for the healthcare sector.

Q9. What GST relief applies to renewable energy and green technology?
Renewable energy equipment is now taxed at 5% GST, making green projects more affordable.

Q10. What is the GST rate on soaps, shampoos, and cosmetics?
Everyday use goods like toilet soaps, shampoos, and face powders are now under 5% GST.

Take a call from Expert
Name *
Mobile Number *
Query

Q11. What GST rate applies to spectacles and vision aids?
Corrective spectacles and vision aids are reduced to 5% GST, providing GST relief for consumers.

Q12. How does GST reform affect vehicles?

Small cars: 18% GST (down from 28%).
Mid-size/large cars & SUVs: 40% GST (no cess).
3-wheelers, buses, ambulances, trucks: 18% GST.
Motorcycles ≤350cc: 18% GST; above 350cc: 40% GST.
Tractors ≤1800cc: 5% GST; above: 18% GST.

Q13. What about GST on insurance?
Life insurance and health insurance policies are now exempt from GST. A huge GST relief for policyholders.

Q14. What are the new GST rates on services?

Passenger transport: 5% (no ITC) or 18% (with ITC).
Goods Transport (GTA): 5% (no ITC) or 18% (with ITC).
Beauty salons, gyms, yoga services: 5% GST (no ITC).
Hotel rooms ≤₹7500 tariff: 5% GST (no ITC).
Pharma, leather, hides job work: 5% GST; other job work: 18% GST.

Q15. What GST rate applies to betting, gaming, and entertainment?

Betting, gambling, lottery, casinos, horse racing, online gaming: 40% GST.
IPL & similar events: 40% GST.

Q16. Why is 40% GST rate introduced?
The new 40% GST rate is applied to luxury and sin goods/services, replacing the earlier cess system.

Q17. What is the purpose of GST reform 2025?

To simplify the GST structure.
Provide GST relief on essentials like food, medicines, insurance.
Bring similar goods under uniform GST rates to reduce litigation.
Tax luxury and sin goods/services under one higher GST slab (40%).
Align India’s GST closer to global tax standards.

References and Other Helpful Guides for GST Relief Reform: