The 56th meeting of the GST Council, chaired by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, was held today in New Delhi. These GST rate changes 2025 align with Prime Minister Shri Narendra Modi’s vision from his Independence Day address on August 15, 2025, introducing next-generation GST reforms. This strategic, citizen-centric evolution of the landmark tax framework aims to enhance the quality of life for every last citizen by improving lives and ensuring ease of doing business for all, including small traders and businessmen.

The GST Council has approved rate rationalization with a focus on the common man, labor-intensive industries, farmers and agriculture, health, and key economic drivers. Below are the key GST rate changes 2025 and exemptions.

Key Exemptions and Reforms

• Exemption on Life Insurance: GST is now exempted on all individual life insurance policies (term life, ULIP, or endowment) and their reinsurance, making insurance affordable and boosting coverage.
• Exemption on Health Insurance: GST exemption extends to all individual health insurance policies (including family floaters and senior citizen plans) and their reinsurance, promoting wider health coverage.

Simplified Tax Structure: GST Rate Changes 2025

The council has rationalized the 4-tier tax structure into a citizen-friendly “Simple Tax” system:

• Standard Rate: 18%
• Merit Rate: 5%
• Special De-merit Rate: 40% (for select goods and services)

This GST rate changes 2025 initiative reduces compliance burdens and enhances transparency.

Detailed GST Rate Reductions

Common Man Essentials

• Reduction from 18% or 12% to 5% on items like hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware, and household articles.
• Reduction from 5% to NIL on Ultra-High Temperature (UHT) milk, prepackaged chena or paneer, and all Indian breads (chapati, roti, paratha, parotta, etc.).
• Reduction from 12% or 18% to 5% on food items such as packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, ghee, etc.
• Reduction from 18% to 5% on beauty and physical well-being services like gyms, salons, barbers, and yoga centers.

Agriculture and Farming

• Reduction from 12% to 5% on tractors, agricultural/horticultural/forestry machinery, harvesting or threshing machinery, and composting machines.
• Reduction from 12% to 5% on renewable energy devices and parts for their manufacture.

Labor-Intensive Goods

• Reduction from 12% to 5% on handicrafts, marble and travertine blocks, granite blocks, and intermediate leather goods.

Health and Medicines

• Reduction from 12% to NIL on 33 lifesaving drugs and medicines, and from 5% to NIL on 3 lifesaving drugs for cancer, rare diseases, and severe chronic conditions.
• Reduction from 12% to 5% on all other drugs and medicines.
• Reduction from 18% to 5% on medical apparatus and devices for medical, surgical, dental, or veterinary use.
• Reduction from 12% to 5% on medical equipment like wadding, gauze, bandages, diagnostic kits, reagents, and glucometers.

Key Economic Drivers

• Reduction from 28% to 18% on air-conditioning machines, TVs (all now at 18%), dishwashing machines, small cars, motorcycles ≤350cc, buses, trucks, ambulances, and cement.
• Uniform 18% rate on all auto parts, irrespective of HS code; three-wheelers from 28% to 18%.
• Correction of inverted duty structure in manmade textiles: Reduction from 18% to 5% on manmade fiber, and from 12% to 5% on manmade yarn.
• Correction of inverted duty structure in fertilizers: Reduction from 18% to 5% on sulphuric acid, nitric acid, and ammonia.
• Reduction from 12% to 5% on hotel accommodation services valued ≤ Rs. 7,500 per unit per day.

Implementation and Additional Changes

• Effective Date: Changes for services and most goods will take effect from September 22, 2025. Tobacco products (pan masala, gutkha, etc.) will retain existing rates until compensation cess obligations are cleared.
• Other Decisions: GST will be levied on Retail Sale Price (RSP) for pan masala, gutkha, cigarettes, and chewing tobacco. An ad hoc IGST and compensation cess exemption is granted on armored sedans imported for the President of India.

Meeting Insights

The GST rate changes 2025 recommendations aim to provide relief to individuals, the aspirational middle class, and facilitate trade. FAQs are being issued for clarity. HSN-wise and sector-wise rate changes are detailed in Annexures I-IV of the official press release.