GST Council meet decides to adopt two-rate tax structure

The Goods and Services Tax (GST) Council, during its 56th meeting on Wednesday (September 3, 2025), decided to revamp the tax into a two-rate structure, as proposed by the Central government, Union Finance Minister Nirmala Sitharaman announced in a press briefing following the meeting.

She added that the decisions would come into effect from September 22.

“These reforms have been carried out with a focus on the common man,” Ms. Sitharaman said. “Every tax levied on a common man has gone through a rigorous looking into, and in most cases, the rates have come down. Labour-intensive industries have been given good support. Farmers and agriculture will benefit from the decisions. Health-related sectors will also benefit.”

She further said that items used by the common man and the middle class have seen a reduction, such as hair oil, soap bars, shampoo, toothbrushes, toothpaste, bicycles, tableware and kitchenware, and other household articles, as they are being moved to 5%.

The proposals before the Council — first mooted by the Centre on Independence Day — include reducing the number of GST rates by doing away with 12% and 28% slabs, as well as the Compensation Cess, while retaining the 5% and 18% slabs, and also introducing a 40% rate.

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The Centre had specified that the rate rationalisation would benefit “the common man, women, students, middle class, and farmers”, and that things used by the common-man and aspirational goods would see their tax rates reduced, should the proposals be accepted by the GST Council.

Prior to the meeting, the Finance Ministers of Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal met in New Delhi on Friday and drafted a note in which they laid out their concerns over the revenue shortfall due to these rate cuts and their proposals for how the Centre could protect the States’ revenues.

Those proposals, too, were discussed by the GST Council during its ongoing meeting.

Meanwhile, the Telugu Desam Party voiced its support of the Centre’s proposals.

“As an alliance partner, we are supporting the Centre’s proposal of GST rate rationalisation,” Andhra Pradesh Finance Minister Payyavula Keshav told reporters ahead of the Council meeting. “It is in favour of the common man.”