GST 2.0: New Slabs After the 56th Council Meeting
Why in the news
The GST Council, chaired by Nirmala Sitharaman, met for over 10 hours on 3 September 2025 (56th meeting) and cleared a sweeping rework of the eight-year-old tax, now called GST 2.0.
Key facts
- Old slabs: 5%, 12%, 18%, 28%.
- Exempt (0%): all individual, family floater, senior citizen, ULIP and endowment life and health policies; 33 life-saving drugs; UHT milk, paneer, rotis, khakra, erasers.
- EVs stay at 5%; gyms, salons, barbers and yoga centres fall from 18% to 5%.
| New rate (from 22 Sept 2025) | Name | Applies to |
|---|---|---|
| 5% | Merit | Essentials: hair oil, soaps, toothpaste, bicycles, packaged foods, medical oxygen, bandages, handicrafts |
| 18% | Standard | General goods; ACs, TVs, dishwashers, cement, small cars, motorcycles below 350cc, auto parts |
| 40% | Demerit | Tobacco, pan masala, big cars and other sin or super-luxury goods |
Structural reforms
- Inverted duty fix: manmade fibre 18% to 5%; manmade yarn 12% to 5%; fertiliser inputs 18% to 5%.
- Automated refunds and simpler MSME registration.
- Net revenue implication ₹48,000 crore (FY24 base); states had feared losses of about ₹80,000 crore to ₹1.5 lakh crore, yet agreed by consensus.
Significance
- Relief for consumers, MSMEs, labour-intensive sectors and farmers; fewer disputes and better compliance.
Exam angle
- Meeting: 56th; effective date: 22 September 2025.
- Rate names: merit 5%, standard 18%, demerit 40%.