1. Rate Rationalisation – Two-Rate GST Structure

The Council recommended rationalising the existing four-tier GST rate structure into a simplified structure comprising a standard rate of 18% and a merit rate of 5%, with a special de-merit rate of 40% for selected goods and services. The recommendations focused on common-use goods, labour-intensive sectors, agriculture, health and key economic drivers.

2. Exemption of Individual Life and Health Insurance

The Council recommended exemption from GST for all individual life insurance policies, including term life, ULIP and endowment policies, and their reinsurance. It also recommended exemption for all individual health insurance policies, including family floater and senior-citizen policies, and their reinsurance.

3. GST Rate Changes on Common-Use Goods and Food Items

The Council recommended reducing GST from 12% or 18% to 5% on various common-use goods, including hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware and other household articles. It also recommended reducing rates on a range of food items, including packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, cornflakes, butter and ghee, with specified breads, UHT milk and pre-packaged and labelled chena or paneer proposed for NIL rate.

4. GST Rate Changes on Automobiles, Cement and Consumer Appliances

The Council recommended reducing GST from 28% to 18% on air-conditioning machines, televisions, dishwashing machines, small cars, motorcycles up to 350 cc, buses, trucks, ambulances and three-wheelers. It also recommended a uniform GST rate of 18% on auto parts irrespective of their HSN code and reduction of GST on cement from 28% to 18%.

5. Rate Relief for Agriculture, Renewable Energy and Labour-Intensive Sectors

The Council recommended reducing GST from 12% to 5% on specified agricultural, horticultural and forestry machinery, including soil preparation, cultivation, harvesting and threshing machinery. It also recommended rate reductions on handicrafts, marble and travertine blocks, granite blocks, intermediate leather goods, renewable energy devices and parts for their manufacture.

6. GST Rate Changes on Medicines and Medical Equipment

The Council recommended reducing GST from 12% to NIL on 33 specified lifesaving drugs and medicines and from 5% to NIL on three specified lifesaving drugs and medicines used for cancer, rare diseases and other severe chronic diseases. It also recommended reducing GST on other drugs and medicines from 12% to 5%, and reducing rates on specified medical apparatus, devices, diagnostic kits, reagents, bandages and related medical supplies.

7. GST Rate Changes on Services

The Council recommended reducing GST on hotel accommodation with a value up to ₹7,500 per unit per day from 12% to 5%. It also recommended reducing GST from 18% to 5% on specified beauty and physical well-being services, including services provided by gyms, salons, barbers and yoga centres. The Council also recommended exemption for individual life and health insurance services and related reinsurance.

8. Implementation Date of Rate Changes

The Council recommended implementation of changes in GST rates on services and on goods other than specified tobacco-related products from 22 September 2025. Pan masala, gutkha, cigarettes, chewing tobacco products such as zarda, unmanufactured tobacco and bidi were to continue at existing GST rates and compensation cess, where applicable, until the compensation cess loan and interest obligations were discharged. The actual transition date for these goods was to be decided by the Union Finance Minister and Chairperson of the GST Council.

9. Risk-Based Provisional Refunds for Zero-Rated Supplies

The Council recommended amendment to Rule 91(2) of the CGST Rules, 2017, to provide for provisional sanction of 90% of refund claims relating to zero-rated supplies on the basis of system-based identification and evaluation of risk. In exceptional cases, the proper officer may undertake detailed scrutiny for reasons recorded in writing. The measure was stated to be operationalised from 1 November 2025, subject to the specified exclusions.

10. Risk-Based Provisional Refunds under Inverted Duty Structure

The Council recommended amendment of Section 54(6) of the CGST Act, 2017, to provide for provisional sanction of 90% of refund claims arising from inverted duty structure, on lines similar to refunds for zero-rated supplies. Pending the necessary statutory amendment, CBIC was to issue instructions to Central Tax field formations for system-based provisional refunds of 90%, to be operationalised from 1 November 2025.

11. Refunds for Low-Value Export Consignments

The Council recommended amendment of Section 54(14) of the CGST Act, 2017, to remove the threshold limit for refunds arising from exports made with payment of tax. The measure was intended particularly to benefit small exporters making exports through courier and postal modes.

12. Simplified GST Registration for Small and Low-Risk Businesses

The Council recommended an optional simplified registration scheme under which low-risk applicants meeting the prescribed self-assessed output-tax-liability condition for supplies to registered persons would receive automated GST registration within three working days of submitting the application. The scheme would allow voluntary entry and withdrawal and was stated to be operationalised from 1 November 2025.

13. Simplified Registration for Small E-Commerce Suppliers

The Council approved in principle a simplified GST registration mechanism for small suppliers making supplies through electronic commerce operators across multiple States, where maintaining a principal place of business in each State creates compliance difficulties. The detailed modalities for operationalising the scheme were to be placed before the GST Council.

14. Place of Supply for Intermediary Services

The Council recommended omission of clause (b) of Section 13(8) of the IGST Act, 2017. Following the proposed amendment, the place of supply for intermediary services would be determined under the default rule in Section 13(2), i.e. the location of the recipient of services. The stated purpose was to facilitate export benefits for Indian suppliers of intermediary services.

15. Post-Sale Discounts – Amendments to Sections 15 and 34

The Council recommended omitting Section 15(3)(b)(i) of the CGST Act, 2017, removing the requirement that a discount be established by an agreement entered into before or at the time of supply and specifically linked to relevant invoices. It recommended that a post-sale discount reducing the value of supply be granted through a credit note under Section 34, with corresponding provisions for reversal of ITC by the recipient, and rescission of Circular No. 212/6/2024-GST dated 26 June 2024.

16. Clarification on Post-Sale Discount Issues

The Council recommended issuance of a circular to clarify issues relating to non-reversal of ITC where a post-sale discount is given through a financial or commercial credit note; treatment of a manufacturer’s post-sale discount to a dealer as additional consideration in the dealer’s transaction with the end-customer; and treatment of post-sale discounts provided in consideration of promotional activities performed by the dealer.

17. Retail Sale Price-Based Valuation for Specified Tobacco Products

The Council recommended valuation under GST on the basis of retail sale price instead of transaction value for pan masala, cigarettes, gutkha, chewing tobacco, zarda, scented tobacco and unmanufactured tobacco. Consequential amendments to the CGST Rules, 2017 and relevant notifications were to be carried out.

18. Specified Restaurant Premises

The Council recommended adding explanations to the definition of ‘specified premises’ for restaurant-service taxation to clarify that a stand-alone restaurant cannot declare itself to be specified premises and consequently cannot opt to pay GST at 18% with input tax credit.

19. Valuation Rules for Lottery Tickets

The Council recommended amendments to the GST valuation rules to align them with the change in the tax rate applicable to lottery tickets.

20. Operationalisation of GST Appellate Tribunal

The Council stated that the GST Appellate Tribunal (GSTAT) would be made operational for accepting appeals before the end of September 2025 and would commence hearings before the end of December 2025. It recommended 30 June 2026 as the limitation date for filing backlog appeals. The Principal Bench of GSTAT would also serve as the National Appellate Authority for Advance Ruling.

21. Other Changes and Exemptions for Specified Goods

The Council recommended an ad hoc exemption from IGST and compensation cess on a new armoured sedan imported by the President’s Secretariat for the President of India. The press release also contained HSN-wise and sector-wise annexures setting out proposed rate changes for goods and services.

Source: Press release, Ministry of Finance / Press Information Bureau, posted 3 September 2025.