56th GST Council Meeting: What Might Get Cheaper, What May Become Costlier? | Economy News

Last Updated:September 03, 2025, 21:35 IST

If the GST Council okays reforms, daily-use items like ghee, nuts, 20L water, namkeen, footwear, apparel, medicines & medical devices may shift from 12% to 5%.

Union Finance Minister Nirmala Sitharaman chairs the 56th meeting of the GST Council on Wednesday, in New Delhi. (Photo Credit: X handle/ Finance Ministry)

56th GST Council Meeting: The 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman and comprising ministers from all states, started on September 3, to discuss the much-awaited rate rationalisation, GST slab restructuring into two rates, and compensation cess. The Council is expected to cut rates on a large number of items from 28% to 18% and from 12% to 5%. However, the final decision of the GST Council will be announced by Sitharaman tomorrow, Thursday, September 4.

Currently, the GST regime has four slabs — 5%, 12%, 18% and 28%. Apart from this, there is a 3% slab for jewellery items.

The 56th GST Council will, over the next two days, discuss the Centre’s ‘next-gen’ GST reform proposal of having just two tax rates of 5 and 18 per cent. A special 40 per cent rate has been proposed to be levied on a select few items.

56th GST Council Meeting: What’s Likely To Get Cheaper?

The GST Council is considering a proposal to cut tax rates on automobiles and auto ancillary sectors from 28% to 18%. GST on fertiliser acids and bio-pesticides may be cut sharply from 18% and 12% to a uniform 5%, easing costs for the agriculture sector.

If the Council agrees to the Centre’s GST reform proposal, most of the common use food items like ghee, nuts, drinking water (20 litre), non-aerated drinks, namkeen, certain footwear and apparel, medicines and medical devices are likely to move from a 12 per cent to a 5 per cent tax slab.

Common use items, ranging from pencils, bicycles, umbrellas, to hairpins, may also move to a 5 per cent slab. Prices of electronic items like a certain category of TV, washing machine and refrigerator are likely to fall because of being taxed at a lower rate of 18 per cent, as against 28 per cent currently.

Products like solar cookers, solar water heaters, and related green energy devices could see their GST reduced from 12% to 5%, supporting clean energy adoption.

Key textile items, including synthetic filament yarns, manmade staple fibre yarns, sewing threads, carpets, gauze, and rubber thread,s may have their rates lowered from 12% to 5%, offering relief to the industry.

For footwear priced below Rs 2,500, GST may be cut from 12% to 5%, while those above Rs 2,500 could see an increase from 12% to 18%.

Apart from this, the Council might also discuss exempting GST from the premium on life insurance and health insurance for senior citizens.

A proposal seeks to raise the price threshold for 5% GST on apparel from Rs 1,000 to Rs 2,500

It is important to note that these are expectations, final decision will be announced tomorrow, September 4.

56th GST Council Meeting: What’s Likely To Get Costlier

Sin goods, including tobacco, cigarettes, gutkha, pan masala and alcohol, are expected to get costlier as the government might introduce a special 40% tax slab on these items, compared with 28% currently.

Taxes on coal, briquettes, and other fuels derived from coal, lignite, and peat are proposed to be raised from 5% to 18%, signalling a revenue-focused shift.

Readymade garments priced above Rs 2,500 could move into the 18% slab, up from 12%.

Compensation Cess

Finance ministers of opposition-ruled states on Wednesday met ahead of the crucial GST Council meeting, and decided to seek compensation for revenue loss incurred by all states following the implementation of GST rate rejig.

Eight opposition-ruled states — Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal– had met last week to decide on how their revenues could be protected once the 12 and 28 per cent slabs are removed.

Opposition states, like West Bengal, have demanded that any levy on top of the 40 per cent rate should exclusively be for sharing with states to make up for their revenue losses.

A compensation cess in the range of 1 to 290 per cent is levied on luxury and demerit goods to create a revenue pool for compensating states for the loss of revenue occurring from the exercise. The compensation mechanism was for the initial 5 years ending June 2022.

The compensation cess mechanism was initially put in place for a 5-year period till June 30, 2022, to make up for the revenue loss suffered by states on account of GST implementation.

The levy of compensation cess was later extended by 4 years till March 31, 2026, and the collection is being used to repay the loan that the centre had taken to compensate states for the GST revenue loss during Covid period.

That loan repayment is going to be over by October-November, post which, compensation cess will cease to exist.

Mohammad Haris

Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More

Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More

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