Two-rate GST to kick in on September 22
ECONOMY – GST
4 SEPTEMBER 2025
- The Goods and Services Tax (GST) Council, during its 56th meeting, decided to revamp the tax structure into a primarily two-rate system, as proposed by the Central government.
- Apart from the two rates of 5% and 18%, the new GST system would also include a 40% “special rate” on sin goods such as tobacco and luxury items such as aerated water, caffeinated beverages, large cars, yachts, and helicopters.
- The government also calculated that the net fiscal implication of the rate cuts, based on consumption patterns in 2023-24, would be ₹48,000 crore.
- However, the officials clarified that the real implication would be known on the basis of current consumption, and that the rate rationalisation was expected to result in a buoyancy effect, and improved compliance.
- The tax on electric vehicles has been retained at 5%.
- “The long-pending inverted duty structure is being rectified for the manmade textile sector by reducing the GST rate on manmade fibre from 18% to 5% and manmade yarn from 12% to 5%,” Ms. Sitharaman said. “That will take care of every anomaly due to duty inversion in this sector.”
- The inverted duty structure regarding fertilizers will also be rectified, with the duty on sulphuric acid, nitric acid and ammonia being reduced from 18% to 5%.
