Two-rate GST structure approved; new rates to kick in from September 22, 2025: Union Minister for Finance and Corporate Affairs Ms. Nirmala Sitharaman

The 56th Goods and Services Tax (GST) Council meeting, chaired by Union Minister for Finance and Corporate Affairs Ms. Nirmala Sitharaman on September 3, 2025, announced major rate rationalisation measures, reducing GST rates to 5% and 18% for most items. Goods of daily use for the common man have been shifted to the 5% slab, while ultra-high temperature milk, paneer, and chena have been moved to the nil bracket. The revised rates will take effect from September 22, 2025, except for tobacco products, which will continue at existing rates until compensation cess obligations are discharged. GST on small cars and motorcycles up to 350 cc has been cut from 28% to 18%, and the same applies to buses, trucks, ambulances, three-wheelers, and auto parts. However, mid-size and large cars, motorcycles above 350 cc, private aircraft, helicopters, yachts, and vessels for personal use will now attract 40% GST.

The inverted duty structure has also been addressed, with GST on man-made fibre reduced from 18% to 5% and on yarn from 12% to 5%. In the fertiliser sector, GST on sulfuric acid, nitric acid, and ammonia has been slashed from 18% to 5%. Renewable energy devices and parts, including biogas plants, solar panels, and wind turbines, will now attract only 5% GST, down from 12%. Prime Minister Mr. Narendra Modi welcomed the reforms, noting that they align with his Independence Day announcement on next-generation GST reforms. He said the Council’s decisions will benefit farmers, Micro, Small & Medium Enterprises (MSMEs), the middle class, women, and youth while boosting ease of living and ease of doing business.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.