The 56th GST Council on September 3, 2025, announced new GST tax slabs, which will take effect from September 22, 2025. According to the reform, the Finance Ministry has reduced the tax rates to 12% and 28%, retaining only 5%, 18%, and 40% rates.
This new update aims to ease the standard of living and built Aatmnirbhar Bharat through the establishment of lower rates, faster registration, and effortless dispute resolution.
Tax Slabs Under the Next Gen GST Reform
- Zero-rated on Insurance
Life insurance, including term, endowment, and Unit Linked Insurance Plan (ULIP), and health insurance, including for senior citizens and families.
- Zero-rated on Generic Food Products
Roti, chapati, paneer, paratha, parotta, ultra-high temperature milk.
- Zero-Rated on Affordable Education
Pencils, crayons, pastels, sharpeners, erasers, exercise books & notebooks, maps, charts, and globes.
- Zero-rated on Drugs/Medicines
33 Lifesaving drugs and cancer/rare disease medicines.
- 5% on Normal Household Items
Tableware, kitchenware, umbrellas, bamboo furniture, utensils, combs, and bicycles.
- 5% on Normal Condiment Food Items
Butter, ghee, dry nuts, condensed milk, jams, confectionery, jellies, tender coconut water, biscuits, pasta, noodles, chocolates, coffee, trail mix (namkeen), cornflakes, cereals, and ice cream.
- 5% on Daily Essentials
Baby food, feeding bottles, napkins for babies, clinical diapers, hair oil, toilet bar soap, shampoos, toothpaste, toothbrush, face powders, talcum powders, and shaving cream.
- 5% on Agriculture & Farmers
Tractor tyres & parts, drip irrigation system, sprinklers, bio-pesticides, micronutrients, balers, mowers, compositing machinery, and other related farm machinery.
- 5% on Labor Intensive Goods
Handicrafts, marble/granite blocks, and intermediate leather goods.
- 5% on Health Care and Medical Equipment
Surgical, dental, and veterinary apparatus, diagnostic kits, glucometers, bandages, corrective spectacles, gauze, test strips, reagents, and medical-grade oxygen.
- 5% on Other Medicines
Medication/drugs other than lifesaving medications and cancer/rare diseases.
- 5% on E-Vehicles
This rate remains unchanged for electronic vehicles.
- 5% on Textile
Manmade yarn
- 5% on Fertilizers
Ammonia, sulfuric acid, and nitric acid.
- 5% on Renewable Energy
Devices and parts
- 5% on Hospitality & Tourism
For bills and hotel rooms less than INR 7500 per day.
- 5% on Personal Care
Salons, beauty parlors, gyms, barbers, yoga, and wellness services.
- 18% on Consumer Goods
Television of all sizes, air conditioners (ACs), dishwashers, and motorcycles (up to 350cc), petrol cars (≤ 1200 cc and ≤ 4000mm), diesel cars (≤1500 cc and ≤4000mm), buses, trucks, and ambulances.
- 18% on Construction
Cement and construction material.
- 18% on Three Wheelers
Three wheelers and auto parts of all kinds.
- 40% on Luxury Items & Sin Goods
High-end cars, racing cars, yachts, personal-use aircraft/planes, cigarettes, and tobacco.
Seamless Registration for Small & Low-Risk Businesses
The GST registration will be granted within three days from the official application on an automated basis to small and low-risk entrepreneurs and businesses with an output tax liability of less than INR 2.5 lacs/per month.
This scheme takes effect from November 1, 2025, and will provide for voluntary opting and withdrawal. It also applies to e-commerce businesses operating in multiple states.
Dispute Resolution
Apart from the tax rates, the reform aims to resolve GST disputes through a simplified and faster forum, Judicial Mechanism Goods and Services Tax Appellant Tribunal (GSTAT), which will be operational by September, with case hearings starting from December 2025.
The Final Words
From reducing the tax burden to boosting the overall economic growth, this reform aims to make daily consumables and essentials more affordable for middle-income individuals and businesses. With the establishment of the GST Appellate Tribunal, tax disputes will be resolved through an improved and faster mechanism, ensuring smooth functionality of the GST system.
Frequently Asked Questions
Which tax slab has been quashed through the latest 56th council GST reform?
12% and 28% have been written off under the latest GST reforms.
What is the advantage of simplified GST registration under the new reforms for online marketplaces and businesses?
According to the new rules, the e-commerce business operators don’t have to keep a principal place of business in every state where they operate/function. This rule will be effective from November 1, 2025.
What is the effective date for the new GST slabs?
The new rates will take effect from September 22, 2025.
What is the standard tax rate on Indian Premier League tickets?
Goods and Services Tax (GST) on IPL tickets is 40%. Tickets for other sporting events remain at the nominal 18%.
What is the tax rate for contract services relating to oil and gas exploration in the offshore areas?
The standard GST is 18% for (E&P) contract services.
What is the GST rate for the transportation of goods through a multimodal transporter?
A standard 5% GST will apply with restricted input tax credit, provided no logistic by air is involved at any point of time throughout the transportation journey.
What will be the tax treatment of passenger transportation services?
The service providers have either of the two options:
– Paying 5% GST with zero input tax credit (ITC); or
– 18% GST with ITC.What is the GST on motor vehicles exceeding 350cc?
The rate is 40% GST on motor vehicles exceeding 350cc and 5% on less than 350CC.
What is the GST for road tractors for semi-trailers?
Road tractors for semi-trailers with a capacity exceeding 1800cc will attract an 18% GST, unlike the new 5% reduced rate.
Does the 5% reduced GST apply to all types of medical equipment?’
Yes, the 5% GST rate applies to all kinds of medical equipment used in surgical, dental, and veterinary purposes.
What is the tax treatment of plant-based milks?
Plant-based milk, including soy, oat, almond, or coconut, will now trigger a 5% GST, unlike the previous 18%.
Is there any changes to the threshold for GST registration according to the new GST reform?
No, there’s no modification/change to the threshold/limit for GST registration under the new GST regime.
What will be my tax liability if I had supplied goods/services before the GST changes, but the invoices were issued at a later date?
Your date of tax liability will be as follows:
– If you receive the payment after such a change in GST, then the time of supply (date of tax liability) will be the date of receipt of that payment or the issuance of the invoice, whichever is earlier; or
– In case you’ve received the payment before the change, then the time of supply will be the date you received the payment.Will I get input tax credit at a changed/reduced rate now if the purchase/sale was made before the GST changes?
No, you’re only eligible to obtain ICT in accordance with rates that were valid at the time of such sale/purchase. The new rules won’t apply to your prior ICT transactions.
Will I be able to offset future GST payments after the current GST changes if I already have an additional GST tax credit in my account?
The GST tax credit in your account will remain unaffected by the current rate changes. You can use it to pay future GST bills.
Can I reverse my credit if the outward supply is now exempted under the new GST regime?
You may use it to offset tax bills for supplies made before Sept. 21 when the GST was applicable. You’ll have to reverse the credit for supplies made after Sept. 22 as per the Central Goods and Services Tax of 2017.
Can I request a refund for the extra GST tax credit that I collected up to Sept. 22?
You can get a refund in case the tax on inputs is higher than the tax on outputs. However, the same rule won’t apply if goods are the same, but the rate changed (higher before and reduced after). In the latter case, you cannot request a refund.
What will be the tax treatment if I already have stock when the rate change comes into effect on Sept. 25?
The tax is levied on supplies, so if goods and services are supplied after the said change will be taxed as per the changed rates.
Do I need to generate new e-way bills after the new GST changes take effect?
No, you don’t need to create new e-way bills if you already generated bills before the new rate took effect. The same bill will apply until it expires.
What is the GST rate on non-alcoholic beverages?
The rate on soft drinks and non-alcoholic beverages is 40%.
What is the rate of food preparation as per the new GST regime?
Food preparation not elsewhere included will trigger a 5% tax rate.
Why has the GST not been removed from raw cotton?
GST on raw cotton is passed along the supply chain, so textile industries can claim it back as input tax credit. This entire process will help keep the cost lower for the end users, as they’re the ones who bear the tax burden.
Why didn’t the GST council exempt agricultural tractors?
The GST helps the producers/manufacturers claim input tax credit on spare parts and raw materials that are used to manufacture a tractor. If tractors are made fully exempt, then such ITCs become a cost for the manufacturer. Subsequently, the said cost is then passed/added onto the seller.
This entire scenario will be costly to the farmer, disrupting the supply chain.
Read more: How to Add Multiple Businesses Under the Same GST Number?
