Published: 4 September 2025ClearTax / PIB / Tally SolutionsEconomy
56th GST Council Approves Two-Rate GST Structure; Removes Earlier 12% and 28% Rates
The 56th GST Council meeting held on September 3, 2025, in New Delhi, chaired by Finance Minister Nirmala Sitharaman, approved a landmark rationalisation of India's GST rate structure. The existing four-slab system (5%, 12%, 18%, 28%) was restructured into two primary slabs — 5% and 18% — with a new 40% slab introduced for luxury and demerit goods such as luxury vehicles, aerated beverages, and gambling. The reforms are effective from September 22, 2025.
Key relief measures included zero GST on UHT milk, packaged paneer, chapati, and roti; reduction to 5% on packaged namkeens, pasta, noodles, and chocolates; and reduction from 28% to 18% on air conditioners, TVs, small cars, and motorcycles up to 350cc. The overhaul aims at simplifying compliance, reducing cascading tax effects, and providing relief to middle-class consumers while maintaining revenue neutrality for the government.
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Linked questionMedium
Which new GST slab was introduced specifically for luxury and demerit goods under the 56th GST Council decision?
Explanation · Correct answer CThe 56th GST Council introduced a new 40% slab specifically for luxury and demerit goods such as luxury vehicles, aerated beverages, and gambling, replacing the earlier 28% slab for these items.
Frequently asked questions
What major reform did the 56th GST Council approve and when did it take effect?
The 56th GST Council, which met on September 3-4, 2025, approved replacing India's four-slab GST structure with a two-slab system of 5% and 18%. The reform took effect from September 22, 2025.
What slabs were removed in the GST rate restructuring approved by the 56th Council?
The 12% and 28% slabs were completely removed from the GST structure. The revised system retains 5% for necessities and 18% as the standard rate, while a new 40% slab was added for luxury and sin goods like tobacco and liquor.
Which everyday essential food items received zero-tax relief under the 56th GST Council's decision?
Zero-tax relief was granted on essential food items including milk, roti (bread), and paneer (cottage cheese). This change aims to reduce the tax burden on common households consuming basic food items.
What was the purpose of introducing a 40% GST slab in the revised rate structure?
The 40% slab was introduced specifically for luxury and sin goods such as tobacco products and liquor. This creates a higher deterrent tax on harmful and non-essential goods, while simplifying the rate structure for standard goods.
How does simplifying GST slabs benefit India's tax administration and economy?
Reducing GST from four slabs to two (plus a luxury slab) simplifies compliance for businesses, reduces classification disputes, and makes the tax system more transparent. It also eases the burden on small traders who found multiple rates complex to manage.
