The 56th meeting of the GST Council on September 3, 2025 will be remembered as a defining milestone in India’s tax history. These reforms go far beyond tax rates and structures. They represent a decisive shift towards a simpler, fairer, and growth-oriented system that is aligned with the aspirations of a Viksit Bharat 2047.
A long-standing demand of both industry and consumers has been simplification of the multiple GST slabs (5%, 12%, 18%, and 28%). The move to a transparent “Simple Tax”, with just two rates, 18% as the Standard Rate and 5% as the Merit Rate, along with a 40% de-merit rate for a select few goods — is transformational.
This bold step reduces compliance burdens, enhances predictability for business, and makes the tax regime more citizen-friendly. It clearly signals the government’s commitment to align Indian taxation with the best global practices.
Relief for a range of income groups
The reforms directly touch the daily lives in Indian households. Common items such as soap, shampoo, toothpaste, a bicycle, and kitchenware are now in the 5% bracket. Essentials such as Ultra-High Temperature milk, paneer, chapati and paratha are exempt. Packaged foods, noodles, chocolates and beverages have seen notable rate cuts, boosting consumption and offering relief to families across income groups.
Equally impactful is the exemption of GST on all life and health insurance products. This single decision will make insurance more affordable, particularly for senior citizens and low-income families, raising India’s insurance penetration and strengthening social security.
Health care has been given a powerful boost through exemptions and reductions on essential drugs, devices, and treatments for cancer, rare diseases and chronic conditions. These measures ensure wider access to modern medicine and diagnostics, easing financial burdens on households. Farmers stand to benefit from major reductions. Tractors, farm machinery, and other vital implements now attract only 5% GST, while fertilizers and inputs such as sulphuric acid and ammonia have moved from 18% to 5%. By correcting earlier inverted duty structures, these reforms lower cultivation costs and improve farm productivity.
Labour-intensive sectors such as handicrafts, marble, granite, and leather goods now enjoy reduced GST rates, which will stimulate demand and secure employment. By making traditional industries more competitive, the reforms safeguard livelihoods while opening new growth avenues.
Changes in critical sectors
A particularly significant achievement is the correction of inverted duty structures in critical sectors. For instance, the GST reduction on man-made fibre and yarn to 5% eliminates a distortion that had long plagued the textile value chain. This move is expected to boost competitiveness, exports, job creation, and domestic value addition across textiles and apparel.
Cement, a cornerstone for housing and infrastructure, has shifted from 28% to 18% GST. This will drive multiplier effects across construction and infrastructure, while cuts for renewable energy devices and automotive components will accelerate India’s green growth journey.
The Confederation of Indian Industry (CII) has consistently called for such corrections and is gratified to see so many recommendations accepted that range from a rationalisation of auto parts to relief for hospitality and wellness services. These changes will harmonise markets and reduce unnecessary disputes.
The announcement that the Goods and Services Tax Appellate Tribunal (GSTAT) will become operational by year-end marks a historic institutional advance. For tax-payers, this means faster dispute resolution, more consistent rulings, and enhanced trust in the system. Other process reforms, including provisional refunds for inverted duty structures, risk-based compliance checks, and harmonisation of valuation rules, further reduce uncertainty and compliance costs. Together, these measures reinforce India’s position as one of the world’s easiest large economies for doing business.
Over the past eight months, the CII has strongly advocated simplification into a two-rate structure, a correction of anomalies, a reduction of rates on essentials, support for labour-intensive sectors, and faster operationalisation of GSTAT. It is heartening that so many of these have now been adopted.
The Council’s decisions reflect both responsiveness and a deep sense of partnership with industry. This is a proud moment for all stakeholders who have constructively engaged in shaping these reforms.
Almost immediate benefits
Equally noteworthy is the careful phasing of reforms from September 22, 2025. This sequencing ensures revenue stability while allowing industry and consumers to benefit immediately from lower rates. The approach safeguards fiscal health while stimulating demand and investment.
These announcements are more than technical adjustments. They are a people’s reform. They touch citizens, farmers, workers, businesses and entrepreneurs alike. By simplifying the structure, lowering rates on essentials, correcting distortions, and strengthening institutions, GST 2.0 has created a stronger foundation for India’s growth journey.
The CII stands ready to support effective implementation, build awareness, and ensure that the benefits of these reforms flow seamlessly to every citizen.
Chandrajit Banerjee is Director General, Confederation of Indian Industry (CII)
Published – September 05, 2025 12:08 am IST