GST Council / Now there are only 3 slabs in GST, new rates will be applicable from September 22

GST Council: A historic decision was taken in the 56th meeting of the GST Council on Wednesday, 3 September 2025, chaired by Finance Minister Nirmala Sitharaman. Now only two slabs of GST—5% and 18%—will be applicable, while the slabs of 12% and 28% have been completely abolished. Apart from this, there will also be a special slab for some luxury items. This new structure will come into effect from 22 September 2025.

Key changes and impact

Finance Minister Nirmala Sitharaman said that the aim of this reform is to provide relief to the common man and small businesses. Based on the talk of next generation reforms by PM Narendra Modi on Independence Day 2025, the GST Council took this decision unanimously on rate rationalization. Finance ministers of all the states cooperated in this process.

What will be cheaper?

• Essential items: There will be no GST on items needed by the common man like ultra high temperature milk, chenna, paneer, and bread.
• Agriculture and farmers: GST on farmers' products, such as medicines, tractors, ghee, and butter, has been reduced from 12% to 5%.
• **Consumer goods: GST on ACs, washing machines, TVs larger than 38 inches, and small cars will be reduced from 28% to 18%.
• Shoes and clothes: GST on these has been reduced from 12% to 5%.
• Health and vision equipment: 5% GST on glasses and vision equipment, while there is no GST on 33 medicines.
• Cement: GST on cement will be reduced from 28% to 18%.
• Health and life insurance: Big relief has been given in GST on these too.

What will become expensive?

• Luxury items: Special slab will be applicable on bikes with engine more than 350 cc, luxury cars, tobacco, zarda, pan masala, flavored drinks, and other packaged beverages.
• Luxury electric vehicles: A proposal to increase GST from 5% to 18% on electric vehicles priced above ₹20 lakh will come up for discussion in the next meeting. This could hit companies like Tata Motors, Mahindra, Tesla, Mercedes-Benz, and BMW.

Relief to MSMEs and startups

• The GST Council has taken several steps to reduce the compliance burden for small businesses and startups:
• Faster registration: GST registration of MSMEs and startups will now be done in just 3 days instead of 30 days.
• Faster refunds: Refunds stuck under the inverted duty structure for textiles, pharma, chemicals, and fertilizer industries will be settled in 7 days

Concerns about revenue loss

Eight states—Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, West Bengal, and Karnataka—have sought compensation for revenue loss due to rationalization of the GST structure. This issue will be part of the discussion in the meetings on September 3 and 4.