GST Council Meeting 2025 Highlights: PM Modi hails reforms, calls it double dose of support, growth for nation

On opposition calling the reforms as '1.5 reforms' and using terms like 'better late than never', Union minister of commerce and industry, Piyush Goyal says, "Well, I think it only demonstrates their ignorance that they have not understood the step-by-step systematic way in which Prime Minister Narendra Modi has made this entire GST over the last eight years a success story which is watched by the whole world. He has ensured that more than 30 taxes, duties and levies have been abolished and combined into one tax. At that point in time, states wanted to make sure they didn't lose revenue. So there was a fitment in the nearest rate for all the products. Over the past 80 years, Prime Minister Modi has consistently reduced the rate, helping the people, the common man, whenever required. I remember in 2018, he had reduced it to over 100 items. And has continuously been very sensitive to the demands of people. But this time, since the compensation was no longer required, having met the 14 % compensation growth every year to the states by November or so, it will not be required, his will has given him the elbow room and Prime Minister Modi decided that all of it should go back to the people of India and it's a game-changing transformation."

"The GST reforms reduction rationalisation is encompassing the entire gamut of goods and services that touch a common man, that are required by farmers, that will give a good boost to the MSME sectors, our youth, our women, everybody stands to benefit... It's very holistic, very comprehensive. This, to my mind, is Prime Minister Narendra Modi's gift to the people on the eve of Diwali. It will be implemented on 22nd September, the first day of Navratri. And clearly, it's the biggest transformational reform that we have seen in decades. This will certainly give a big boost to consumption... It'll bring simplicity to operations. So businesses will find it easier to do business. Common men and women will start meeting their aspirations for the better things of life," Union minister of commerce and industry, Piyush Goyal said.

Prime Minister Narendra Modi on Thursday said that wide-ranging reforms approved by the GST Council will improve the lives of citizens as he hailed the overhaul of the tangled Goods and Services Tax regime.

In an interaction with National Teacher awardees, Modi noted that five new gems (panch ratna) have been added to India's vibrant economy through the GST reforms.

The government's decision to exempt individual health and life insurance premiums from Goods and Services Tax (GST) complements Ayushman Bharat and PMJAY by expanding private coverage, reducing out-of-pocket expenditure, and driving the mission of Health for All, the Health Ministry said on Thursday.

This will also make premiums more affordable for middle-class households and encourage wider insurance adoption.

The GST rationalization package reflects a balanced, citizen-centric approach to taxation, the ministry stated.

"By lowering the burden on medicines, medical devices, nutrition, and insurance, while discouraging harmful consumption, the Government has taken a major step towards making healthcare more accessible, affordable, and preventive in nature," the ministry said.

Healthcare services provided by doctors, hospitals, and diagnostic centres are already exempt under the current GST regime. Building upon this, several key reforms have been approved on Wednesday.

"Under the visionary leadership of PM @narendramodi ji, the Union Government has announced the Next-Gen GST reforms to support ongoing growth and development."

"GST 2.0 is a double dose of support and growth for the nation. Next generation reforms in GST has been done to support India's progress in 21st century. Five new gems (panch ratna) have been added to India's vibrant economy through GST reforms," PM Modi said.

PM Narendra Modi says, "Summarising the reforms done in GST, it will add five gems to the Indian economy. First, the tax stream will be simpler. The quality of life of the citizens of India will increase, consumption and growth will increase, the ease of doing business will boost investment and employment, and cooperative federalism will become stronger for a developed India."

Prime Minister Narendra Modi says, "Now GST has become even simpler... On 22 September, which is the first day of Navratri, the next gen reform will be implemented as all these things are definitely related to the 'Matrishakti'."

PM Modi said, "for fitness enthusiasts, the government has introduced lower tax for gyms, salons and yoga services."

Prime Minister Narendra Modi said, "Without timely changes, we cannot give our country its rightful place in today's global situation. I had said from the Red Fort on 15 August this time that it is crucial to undertake next-generation reforms to make India self-reliant. I had also promised the countrymen that there would be a double blast of happiness before this Diwali and Chhath Puja..."

“India’s tax landscape is poised for a major transformation ushered in by the historic 56th GST Council meeting. The Council’s decisions focus on easing compliance, reducing the tax burden on essentials, and providing greater clarity to businesses.

At the heart of the reform is the rationalisation of GST rates. The existing multi-tiered system has been streamlined into a simple two-rate structure: 5% for essential and merit goods, and 18% as the standard rate. A higher 40% levy is reserved only for luxury and sin goods, ensuring balance between affordability and revenue. There would be a sizeable reduction in disputes with predictability and stability in the rate structure.

In a major relief for households, individual life and health insurance services are exempted from GST, making insurance more accessible. Tax reductions on food items, fertilizers, tractors, textiles, medicines, and medical devices are expected to lower everyday costs and support farmers, patients, and consumers alike.

Businesses and exporters stand to benefit from new measures like expeditious 90% provisional refunds arising due to Inverted duty structure, clarity on intermediary services enabling Indian firms to claim export benefits, and smoother provisions on post-sale discounts. To strengthen dispute resolution, the long-awaited GST Appellate Tribunal (GSTAT) will become operational soon.

These initiatives signal not just tax changes, but a next-generation reform vision—one that simplifies processes, strengthens trust, and aligns with India’s growth aspirations.
These reforms could lead to more structural changes in GST in next couple of years,” says S. Ramesh, Managing Director - Price Waterhouse & Co LLP.

Bharatiya Mazdoor Sangh said, "The new GST reforms introduced by the Finance Ministry represent a significant step towards a tax structure. Traditionally, the indirect tax regime was heavily reliant on taxing the day-to-day needs of the citizens. This trend has now been reversed through the next which introduce a primarily tw the tax burden on the people, while imposing higher taxes on luxury goods consumed by the high BMS welcomes the reduction of taxes on labour essential daily use consumer goods, cement products including insurance policies, educational materials, agricultural machinery and other inputs, automobiles, electronic appliances, and other items commonly used by the middle class and below."

BJP leader V Muraleedharan said, "The new tax slabs of the GST, which were announced by the Finance Minister yesterday, is a great Onam gift to the people of Kerala. It has come on the eve of the greatest festival of the Keralites. It is going to benefit the poor, middle class, and various other sections of society... Zero GST will be applicable on health insurance. GST Council has decided to enhance the GST for big corporates... Tax revenues will not come down... I dont understand why the Kerala Finance Minister did not raise any objections during the GST Council meeting, but after the meeting, he interacted with the Malayali media and said that it will create problems for Kerala."

Mother Dairy's managing director Manish Bandlish said, "We as an organisation and as a sector really welcome the steps taken by the government. There are multiple products like ghee and cheese where GST has been reduced from 12% to 5%. Ice creams have come down from 18% to 5%, and paneer has been brought down from 5% to zero."

"All these benefits will pass onto the consumer, and we hope that consumption of these products will increase. Organised sector will get a boost," ANI quoted Bandlish

The Goods and Services Tax (GST) Council, chaired by Union finance minister Nirmala Sitharaman, on Wednesday announced the most extensive revamp of the indirect tax system since its rollout in 2017.

The reform introduces a simplified two-slab structure of 5% and 18%, alongside a new 40% slab for luxury and sin goods. The new rates, except for tobacco where cess continues, take effect from September 22, the first day of Navratri.

Revenue secretary Arvind Shrivastava estimated the net fiscal implication of the changes at Rs 48,000 crore. He added the measures are designed to spur consumption and improve compliance.

Union commerce and industry minister Piyush Goyal on Thursday described the sweeping Goods and Services Tax (GST) rationalisation as “game-changing” and urged the industry to ensure that consumers receive the full benefit of rate cuts.

As per news agency PTI, speaking at the India MedTech Expo 2025, Goyal said, “Yesterday’s reform in indirect taxes in GST, coming on the back of several initiatives over the last 11 years, is transformational in nature, significantly impacting the pharma sector, significantly impacting so many sectors, right from the farmer until our MSMEs.”

He added, “Every stakeholder in the country, every consumer, stands to benefit.”The minister emphasised that the reduction in GST rates would lower costs across industries and play a vital role in India’s journey to becoming a developed nation by 2047.

He urged businesses to “pass on all these benefits of GST to the consumers.”According to him, the pharma and nutraceutical industries are among the major sectors that will gain.

The automobile industry has welcomed the GST Council’s decision to reduce tax rates on vehicles, calling it a timely step that will lift demand, make cars and two-wheelers more affordable, and particularly benefit first-time buyers and middle-income families.

The new two-tier structure, announced on Wednesday, simplified levies to 5% and 18% from September 22, coinciding with the start of Navaratri.

Industry leaders said the changes would inject fresh momentum into the sector and urged the government to quickly clarify rules on compensation cess on unsold vehicles to ensure a smooth transition.

“The recent move of GST exemption on individual life and health insurance premiums is a significant win for customers, specifically for those in the lower-income brackets. From their perspective, this directly reduces the out-of-pocket cost of purchasing insurance and helps them focus on other essential needs. As a family weighs their annual budget, this reduction in tax burden can be the sole deciding factor in securing their health or their children's future. This move makes that critical decision fundamentally easier for millions of such families.

By solving for affordability, health and life coverage will now be widely accessible to the underserved population, who previously found premiums to be a heavy financial burden. This reduced cost barrier not only encourages new individuals and families to secure protection but also allows existing policyholders to potentially opt for higher coverage amounts, thereby strengthening their financial security. This customer-centric reform makes insurance a more viable tool for financial planning and risk management for millions of citizens.

Our goal at PhonePe is to provide affordable and accessible coverage to underserved populations across the country by leveraging our deep expertise in trusted, digital-first solutions. This reform is synonymous with our aim of empowering families to opt for the right level of coverage, whether it is a comprehensive health plan that covers critical illnesses or a term plan that protects their dependents' future. As a key player in the insurance industry, PhonePe is eager for this step towards financial inclusion.

We welcome the Council’s deliberations and are committed to delivering the promise of affordable, accessible insurance for every Indian, in alignment with the IRDAI’s vision of ‘Insurance for All by 2047’. After all, a well-insured India is a more confident and robust India,” says Vishal Gupta, CEO, PhonePe Insurance.

Morgan Stanley, the global investment bank, expects the restructuring of the Goods and Services Tax (GST) framework to drive increased consumption as the festive period approaches.

The investment firm's recent research analysis indicates that transitioning from the current four-tier GST system to a streamlined two-rate framework, comprising an 18 per cent standard rate and a 5 per cent merit rate, will enhance affordability of numerous goods and services. Select items like tobacco products and luxury items will continue attracting a special demerit rate of 40 per cent.

"We expect the improved affordability to give a fillip to consumption, especially as the new GST tax structure is effective from the start of the festive season," states the report, noting that the reduction in indirect taxation would stimulate widespread demand growth, with particular advantages for lower-income families.

“The newly announced two-slab GST structure of 5% and 18% is a progressive move to rationalize the prevailing inverted duty structure, improvise classification, simplify approvals & processing refunds. These measures will surely cut costs at different tiers while enhancing the ease of doing business and driving consumption.

Within real estate, the slashing of GST on cement will play a critical role in rehauling project cost structures as cement forms a major value component in the overall cost of construction. Residential real estate, particularly new homebuyers, stand to gain as developers are likely to pass on the benefit of lower costs in the form of reduced housing prices. Developers’ profitability margins, too, can potentially improve, enhancing the overall financial health of the real estate sector. The timing of this rollout is appropriate, with the festive season in the offing and the real estate sector is already reaping the benefits of favourable interest rates,” says Vimal Nadar, Senior Director & Head of Research, Colliers India.

“The Cement Manufacturers’ Association (CMA) welcomes the Government of India’s announcement reducing the GST rate on Cement from 28% to 18% on a long-standing request of the Cement Industry. The Cement Industry considers it a progressive step towards simplifying the tax structure.

For a long time, Cement has been taxed at one of the highest rates among essential building materials compared to sectors such as steel and several other construction input materials. Lowering the rate to 18% corrects this long standing anomaly and ensures parity with other core materials.

Moreover, a reduction in GST stands to enhance the competitiveness of the Indian Cement Industry by creating a fair game with global peers. Given that Cement is a foundational input material for infrastructure and housing, treating it more fairly in the tax structure is consistent with global practices and will likely boost consumption of this key building material towards augmenting considerable infrastructure, including affordable housing,” says Neeraj Akhoury, President, Cement Manufacturers’ Association and Managing Director, Shree Cement Limited.

“The rationalisation of GST slabs is a welcome move that will act as a stimulus to the Indian economy by boosting discretionary income and fuelling consumption across sectors. For travel and tourism, the cut in GST on hotel rooms priced below ₹7,500 will make stays more affordable for a large share of Indian travellers, reinforcing demand in the domestic market,” says Rajesh Magow, Co-Founder and Group CEO, MakeMyTrip.

Insurance equities experienced significant demand on Thursday, with Star Health witnessing a rise exceeding 9 per cent, following the exemption of life and health insurance premiums from goods and services tax (GST).

Finance Minister Nirmala Sitharaman announced on Wednesday, after the 56th GST Council meeting, that GST exemptions would apply to all individual life insurance policies, including term life, ULIP, endowment policies and subsequent reinsurance.

On the BSE, Star Health and Allied Insurance Company shares rose by 9.35 per cent, whilst Niva Bupa Health Insurance Company increased by 9 per cent. ICICI Prudential Life Insurance Company advanced by 5.70 per cent, ICICI Lombard General Insurance Company gained 5 per cent, Life Insurance Corporation of India rose by 5 per cent, HDFC Life Insurance Company increased by 4.90 per cent, and SBI Life Insurance Company showed growth of 4.88 per cent.

“The GST rate rationalisation, following the income tax cuts and lower interest rates, is a serious effort to boost consumption and hence the overall economic growth outlook. A wide range of products and some services will now be at lower rates which is a positive surprise. This coupled with certain process reforms is also positive for SMEs. While the direct beneficiaries include consumer, autos, cement, healthcare and insurance sectors, the second order beneficiaries in terms of growth will be retail banks & NBFCs,” says Rahul Singh, CIO-Equities, Tata Asset Management.

Union Minister Hardeep Puri praised the government's significant decision to reduce and streamline GST rates on Thursday, stating that these modifications will enhance economic development and strengthen India's 'Atmanirbhar Bharat' initiative.

Writing on X, the Union Minister explained that these changes are designed to enhance citizens' quality of life, whilst establishing a consistent, clear and progressive taxation framework that would advantage farmers, middle-class citizens, MSMEs and commercial enterprises.

"As announced by PM Sh @narendramodi Ji on Independence Day, the Next-Gen GST reforms aim to simplify compliance and improve the ease of living for citizens. These reforms focus on creating a stable, transparent, and growth-oriented tax system that will benefit farmers, the middle class, MSMEs, and businesses," he said.

"By making GST simpler and more predictable, these changes will boost economic growth and further support India's vision of Atmanirbhar Bharat," the post concluded.

The Congress party on Thursday described the newly approved GST reforms by the GST Council as "GST 1.5", expressing uncertainty about its potential impact on private investment and the MSME sector.

The party stated that a fully revamped "true GST 2.0" is yet to materialise.

Jairam Ramesh, the Congress general secretary responsible for communications, highlighted that the states' crucial request for a five-year extension of compensation to safeguard their revenues, made in accordance with cooperative federalism, remains unfulfilled.

“The GST Council’s approval of the proposed rate change is a welcome move that should boost consumption, while giving businesses a 20-day transition to prepare. The grant of export status to intermediary services would bring to rest litigations on what qualifies as intermediary and accordingly reduce refund denials on this account. Similarly, the changes on post-sale discounts would reduce a large dispute on their allowability. With the discontinuation of the compensation cess, the original design of GST stands reinstated, which is a significant step towards a simpler and more stable tax regime,” said Abhishek Jain, Indirect Tax Head & Partner, KPMG.

“GST council has come up with the biggest and boldest rate cuts since introduction of GST. This will lead to significant buoyancy in demand by boosting consumption.

Since the rate cuts are applicable from September 22nd, it gives some time for industry to prepare for the changes, including mechanism to pass on the benefits to consumers. Timing of these changes couldn't have been better, just ahead of the festive season. Diwali has come earlier for the common man,” says Pratik Jain, Partner Price Waterhouse & Co LLP.

Regarding the fiscal implications, Revenue Secretary Arvind Shrivastava explained that based on the 2023-24 consumption patterns, the net financial impact was calculated at Rs 48,000 crore. He emphasised that these council decisions would benefit the entire economy, likely stimulating growth and influencing consumer spending patterns.

Additionally, Shrivastava noted that these policy changes are anticipated to improve compliance levels, whilst affecting cash refunds and input tax credit arrangements. Although some opposition-governed states expressed concerns about revenue reduction, the finance minister countered that the rate adjustments would lead to increased consumption and enhanced economic activity.

"Nobody is a donor and nobody is a donee," she stated, highlighting that the reforms were consumer-focused and reflected a collective decision-making process, adding "we were all into it".

PM Modi expressed satisfaction over the GST Council's decisions, highlighting his administration's commitment to implementing progressive reforms.

Using social media platform X, Modi expressed appreciation for the unanimous agreement between Union and States on GST reforms, emphasising benefits for common citizens, agriculturists, MSMEs and youth. He noted that the Union government had proposed comprehensive GST rate adjustments and procedural improvements aimed at enhancing living standards and economic growth.

The Prime Minister further emphasised that these extensive reforms would enhance citizens' lives and facilitate business operations, particularly for small-scale traders.

“During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.

The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and strengthening the economy.

Glad to state that @GST_Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women and youth.

The wide ranging reforms will improve lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” PM Modi posted on X.

"The reforms have been carried out with a focus on the common man. Every tax levied on common man's daily use items have undergone a rigorous look, and in most cases, the rates have come down drastically. Labour intensive industries have been given good support," Sitharaman stated after a 12-hour meeting, during which some states required persuasion to endorse the reforms.

Sitharaman acknowledged all states' cooperation in finalising the Centre-developed package, emphasising the collaborative nature of the GST Council's functioning between states and the Centre.

Various essential medicines are being shifted to the zero-rate category. Current rates on tobacco products will remain until all loans and interests are settled.

Automobile prices will reduce as smaller vehicles will now attract 18% tax, down from 29% (28% tax plus 1% cess), while larger vehicles, including SUVs, will face 40% GST instead of 50% (28% tax plus 22% cess). Electric vehicles maintain their 5% rate.

Common food items like paneer, ghee and namkeen will now attract 5% or zero tax, whilst daily consumer products including hair oil, shampoos and toothbrushes move to the 5% category. Additionally, all white goods - from refrigerators to ACs, dishwashers and TV sets - along with cement shift to 18% from 28%.

The GST Council, led by Union finance minister Nirmala Sitharaman, approved on Wednesday a significant restructuring of the eight-year-old indirect tax system, introducing a dual-rate framework of 5% and 18%, alongside a 40% category for select sin goods and services.

The revised rates, except for tobacco products, will be implemented from September 22, coinciding with Navratri's commencement and the traditional start of the peak shopping season. The compensation cess will cease with the implementation of new rates.

These comprehensive modifications, initiated by the Centre, eliminate the 12% and 28% slabs, aiming to streamline the tax structure and resolve classification conflicts. This means all Indian breads will be GST-free, and individual life health insurance policies will receive tax exemption.