Key Tax Update from Budget 2026
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Highlights of the 56th GST Council Meeting – Key Decisions & Its Impact on Taxpayers
09/04/2025
The 56th meeting of the GST Council was held on 03rd of September, 2025 at Sushma Swaraj Bhavan, New Delhi, chaired by the Union Finance & Corporate Affairs Minister Smt.
Nirmala Sitharaman. The session proved to be historic with major reliefs for consumers and Middle Class Indians, the rationalization of GST rates on various goods and services, and significant steps to improve ease of doing business.
The GST Council has rolled out a major tax reset that will change how much you pay fir everyday items. Earlier there were four rates i.e 5%, 12%, 18% and 28% now there are two rates only i.e 5% and 18%. These new GST rates are effective from 22nd September 2025.
Here are the key takeaways from the 56th GST Council meeting for the taxpayers and the Middle Class Indians :
1. Changes in GST Rates – Goods:
The Council approved a wide-ranging reduction in GST rates across essential goods, with the intent to ease the burden on the common man and aspirational middle class Indians. Some of the keys rate reductions are shared below :
- Food & Dairy Products: UHT milk, paneer, condensed milk, butter, ghee, cheese – GST reduced to Nil or 5%.
- Dry Fruits & Nuts: Almonds, pistachios, dates, figs, and more – reduced from 12% to 5%.
- Staples & Packaged Foods: Pasta, biscuits, confectionery, sauces, ice cream, namkeens – rationalized to 5%.
- Healthcare Products: Life-saving drugs, diagnostic kits, medical devices – reduced to Nil or 5%.
- Handicrafts & Traditional Goods: Wooden idols, brassware, stone crafts, bamboo products – all at 5%.
- Vehicles & Mobility: Tractors, electric vehicles, fuel cell vehicles – cut to 5% or 18%, while luxury cars, motorcycles >350cc, yachts, and private aircraft now attract 40%.
- Tobacco & Sin Goods: Pan masala, gutkha, cigarettes, and certain beverages – GST increased to 40%. The Concept of higher rates on Sin Goods is a very appreciable move by the Government where higher rates will discourage buying of such sin goods.
- Big Relief on Insurance: Insurances which is nowadays utmost necessity was earlier taxed at 18% on premium amount. Now, the Council has decided to completely remove GST on both life and health insurance including reinsurance. The Insurance will surely become cheaper for many and this will encourage many people to buy health cover and life protection.
2. Changes in GST Rates – Services:
- Clarification that standalone restaurants cannot declare themselves as “specified premises” to avail ITC benefit at 18%. Normally, restaurants charge 5% GST, but they cannot claim Input Tax Credit (ITC) (i.e., they can’t adjust the GST they pay on rent, electricity, supplies, etc. against the GST they collect from customers). Whereas, there is one exception i.e restaurants inside big hotels or clubs (called “specified premises”) can choose to charge 18% GST and also claim ITC. Some standalone restaurants (not in hotels) were trying to call themselves “specified premises” just to take this benefit. The GST Council has clarified that Only restaurants inside such hotels/clubs can be treated as “specified premises.” And A standalone restaurant on its own cannot do this.
- The government charges GST on the value of a service/product. But for some special items like lottery tickets, the way we calculate this “value” has its own rules. In Simple words, The Council wanted to make sure that there’s no mismatch or loophole in how lottery tickets and some other services are valued for GST. This avoids disputes between sellers and the tax department.
3. Trade Facilitation Measures:
Several process reforms recommended to simplify compliance (details to be notified later). 90% provisional refunds for inverted duty structure to be rolled out, backed by risk-based system checks.
4. Operationalization of GST Appellate Tribunal (GSTAT):
A long-pending demand of taxpayers is finally being addressed by the GST Council in its 56th GST Council Meeting i.e. operationalization of GSTAT. GSTAT will accept appeals from September 2025 and finally begin hearings by December 2025. The Principal Bench will also serve as the National Appellate Authority for Advance Ruling. The last date for filing backlog appeals has been fixed at 30th June, 2026. This is expected to strengthen the dispute resolution system and boost ease of doing business.
Conclusion
The 56th GST Council meeting strikes a balance between relief for households, more clarity for businesses, and also revenue protection for the government. It’s a win win move for all. The massive rate cuts on essential goods and healthcare, alongside reforms in trade facilitation and the launch of GSTAT, mark a significant step towards a simpler, more transparent, and citizen-friendly GST regime.
The real impact will unfold as the new rates kick in from 22nd September 2025, but one thing is clear – this session has set the tone for a more inclusive tax system in India.
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