Overview of GST Reforms
The 56th GST Council meeting on September 3, 2025, introduced significant tax reforms aimed at simplifying and enhancing India’s tax system. These changes are aligned with the goals of a Viksit Bharat 2047, aiming for a simpler, fairer, and growth-oriented system.
Key Changes in GST Structure
- Simplification to two main GST rates:
- 18% as the Standard Rate
- 5% as the Merit Rate
- A selective 40% de-merit rate for specific goods
- This move reduces compliance burdens, enhances business predictability, and signals alignment with global best practices.
Impact on Consumers and Households
- Common household items such as soap and kitchenware are now taxed at 5%.
- Essentials like Ultra-High Temperature milk and paneer are exempted.
- GST on life and health insurance products is exempted, making insurance more affordable.
Benefits for Farmers and Labour-Intensive Sectors
- Tractors and farm machinery now attract only 5% GST.
- Fertilizers and inputs like sulphuric acid have shifted from 18% to 5%.
- Reduced GST rates for sectors like handicrafts and leather goods stimulate demand and employment.
Addressing Duty Structure Anomalies
- The GST on man-made fibre and yarn has been reduced to 5%, benefiting the textile industry.
- Cement has moved from a 28% to an 18% GST rate.
Institutional and Process Reforms
- The operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT) by year-end for faster dispute resolution.
- Process improvements like provisional refunds and risk-based compliance checks.
Strategic Implementation
- Reforms are phased from September 22, 2025, ensuring revenue stability and immediate benefits for industry and consumers.
- These changes are termed 'people’s reforms' due to their widespread impact.
Chandrajit Banerjee, Director General of the Confederation of Indian Industry, highlights these reforms as crucial for India’s growth journey, with CII ready to support effective implementation.