56th GST Council Meet: Big Tax Cuts on Daily Use Items and Essentials Under Next-Gen Reforms

A conference room setting with a group of officials seated at a long table discussing GST reforms, led by Union Finance Minister Nirmala Sitharaman.

The meeting is being held in New Delhi, chaired by Union Finance Minister Nirmala Sitharaman.

It is focused on next-generation GST reforms, with three main pillars:

  1. Structural reforms
  2. Rate rationalisation
  3. Ease of living & doing business

The Centre has proposed simplifying GST into two main slabs: 5% and 18%, by merging the existing 12% and 28% slabs into these lower rates.. A special 40% slab may be introduced for select items (luxury/demerit goods). Daily-use items (like butter and electronics) are expected to see lower tax rates. The Centre is pushing for a uniform 5% GST rate on Electric Vehicles (EVs). The reforms are expected to be formally unveiled around Diwali 2025, aimed at lowering prices and providing relief to consumers, MSMEs, farmers, and the middle class. States ruled by opposition parties are seeking compensation for possible revenue losses due to reduced rates.

Background:

Since July 1, 2017, GST has had a 4-tier structure (5%, 12%, 18%, 28%) plus compensation cess (1–290%) on luxury/demerit goods. Compensation to states was guaranteed only for the first five years, ending June 2022.

In short: The 56th GST Council meeting is setting the stage for a major tax rate overhaul — simplifying GST into two broad slabs (5% and 18%), lowering taxes on essentials, fixing EV tax at 5%, and introducing a 40% rate for limited goods. While this is expected to benefit consumers and small businesses, states are concerned about loss of revenue.