GST Council Meeting 2025 Live: 5% And 18% Tax Structure Approved, 40% For Sin Goods; To Be Implemented From Sept 22

The GST council on Wednesday approved the proposed two-tier tax structure, which will be implemented from September 22. 

The GST Council, which began its meeting on Wednesday, has reportedly approved proposed two-tier GST structure. According to a report by Moneycontrol, citing sources, now goods will be taxed under a dual tax rate structure of 5 per cent and 18 per cent. The other two slabs -- 12 per cent and 28 per cent -- have been removed. The prices of consumer goods will come down due to the lower taxes, leading to an increase in demand and spurring growth in the economy.

However, the government has decided to keep the higher slab of 40 per cent on sin goods such as cigarettes, tobacco, sugary drinks and luxury goods that are bought by the high-income groups.

The GST Council has brought consumer goods such as shoes and clothes in the lower price range of up to Rs 2,500 under the lowest GST tax bracket of 5 per cent, news agency PTI reported citing sources. This would bring more items into the lowest tax bracket, as currently only goods priced up to Rs 1,000 attract a GST of 5 per cent, while those costing more are taxed at a higher 12 per cent.

Luxury and Sin Goods: Tobacco, pan masala, and luxury automobiles.

Electric Vehicles (EVs): Four-wheeled EVs priced between Rs 20-40 lakh could see GST hiked from 5 per cent to 18 per cent, and luxury EVs above Rs 40 lakh may fall under the 40 per cent bracket.

Coal and Certain Energy Products: Coal may move from 5% to 18% after cess removal.

Apparel: Clothing priced above Rs 2,500 per piece could shift from 12% to 18%.

Health and term insurance premiums may become cheaper if the GST Council approves rate cuts at its meeting today. Currently, health and term insurance products attract a GST rate of 18 per cent. Various proposals which have been referred to the council include complete exemption without input tax credit (ITC), a 5 per cent slab with or without ITC, or a 12 per cent rate with ITC.

Finance ministers of opposition-ruled states sought compensation for revenue loss incurred by all states following the implementation of GST rate rejig. Eight opposition-ruled states -- Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal-- had met last week to decide on how their revenues could be protected once the 12 and 28 per cent slabs are removed.

Prices of most of the common use food items like ghee, nuts, drinking water (20 litre), non-aerated drinks, namkeen, certain footwear and apparel, medicines and medical devices are likely to be reduced.

Sectors which are going to benefit from the Centre's next-gen GST reforms include, textiles, fertiliser, renewable energy, automotive, handicrafts, agriculture, health and insurance.

The special 40 per cent rate will also be for other demerit goods like tobacco, pan masala and cigarettes. There could also be an additional tax on top of this rate for this category.

Automobiles, taxed at 28% GST plus a compensation cess, may see differential rates. Entry-level cars are proposed to be taxed at 18% while SUVs and luxury cars are proposed to be taxed at the special 40% tax.

The Centre's next-gen GST reformss propose the elimination of the 12 per cent and 28 per cent brackets. Instead, most goods would be placed under either a 5 per cent or an 18 per cent slab. At present, there are four GST rate slabs, which are 5 per cent, 12 per cent, 18 per cent, and 28 per cent.

The two-day meeting, being held on September 3 and 4, is expected to bring significant changes to India's indirect tax structure, with discussions centred around rationalising and reducing the number of GST slabs.

Chaired by Finance Minister Nirmala Sitharaman, the 56th GST Council meeting began on Wednesday. Ministers from all the states, who are part of the GST council, are also attending the meeting to discuss the GST reforms proposed by the Centre.