GST Council Announces Major Rate Cuts and Moves Towards GST 2.0
The 56th GST Council meeting introduced significant rate rationalizations to boost consumption and simplify the tax structure. Key changes include reducing GST on entry-level cars, medical products, and insurance premiums. The Council moved towards a 'GST 2.0' framework, aiming for a simpler two-rate structure (12% and 18%) while addressing inverted duty structures in sectors like textiles and fertilizers. While sectors like auto and pharma welcomed the moves, airlines and high-end apparel makers expressed concerns over higher slabs. The removal of the compensation cess marks a shift in the federal fiscal landscape, requiring states to seek alternative revenue sources.
Key Points
- The GST Council is a federal body where states and the center collaborate on tax rates and policy reforms.
- Rate cuts on insurance premiums aim to increase social security and insurance penetration among senior citizens and low-income families.
- The move towards a two-rate structure (12% and 18%) is intended to reduce compliance burdens and tax complexity.
- The Goods and Services Tax Appellate Tribunal (GSTAT) is expected to be operational by the end of the year to resolve disputes efficiently.
Exam Facts
- The GST Council's 56th meeting was held on September 3, 2025.
- The revenue implication of these rate cuts is estimated at ₹48,000 crore per year based on 2023-24 data.
- GST on essential medical products for cancer and rare diseases was reduced from 12% to 5%.
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