GST Council Meeting Recap: Reduction to Just Two Tax Rates - 5% and 18%, New Tax Rates Commencing September 22nd

The Goods and Services Tax (GST) Council held a meeting in Delhi on September 3, 2025, marking a significant step towards a more streamlined indirect tax structure in India.

The council approved changes to India's GST structure, adopting a 5% and 18% tax structure for a broad basket of goods and services. This move is expected to make numerous daily-use items more affordable, including groceries, fertilisers, footwear, textiles, and renewable energy.

One of the key decisions made during the meeting was the reduction of the GST rate on carpets and rugs from 18% to 5%. Similarly, the Indian government is considering proposals to cut rates on services such as beauty parlours and low-cost movie tickets.

The Punjab Minister, Harpal Singh Cheema, stated that one slab has been removed from the GST structure, resulting in the creation of three GST slabs. He also mentioned that the council is beginning discussions on the rates rationalisation report, including the report on reducing GST on life, health insurance premiums, which are currently exempt from GST.

In an effort to reduce the compliance burden for MSMEs, startups, and businesses, the council is discussing measures to simplify GST compliance. Proposals include automatic return filing and reducing compliance issues.

The Finance Minister, in a statement, emphasised that the reforms were carried out with a focus on the common man. The council is also considering hiking the GST on garments priced above Rs 2,500 from 12% to 18%. However, items earlier taxed at 12% and 28% will largely migrate to the other two slabs.

The All India LPG Distributors Federation wrote to Union Finance Minister Nirmala Sitharaman requesting a reduction in the GST on LPG Suraksha Hose from 18% to 5%. The Centre is looking to implement the new GST rates by September 22, with several daily-use goods set to become cheaper from this date.

Insurance companies are in talks to rationalise rates, aiming to finalise notifications by the third week of September. The rate for cement has been reduced from 28% to 18%, a move that is expected to bring down the cost of construction materials.

The latest report suggests the Centre is proposing to increase the rate on professional, technical, and business services linked to petroleum crude, natural gas, and mining operations. The council is continuing discussions on these matters, with the aim of creating a more efficient and equitable GST structure for all.