Goods and Services Tax (GST) is eight years old. When GST replaced a patchwork of central and state levies in 2017, businesses welcomed the promise of “one nation, one tax”. But the system has become complex, rates range from 0% to 28% and compliance rules often change.

The GST Council, a constitutional body where the Union finance minister and the finance ministers of all states meet to set policy, is now preparing for its 56th meeting. This gathering, expected after the monsoon session of Parliament (likely late August or early September 2025), could usher in the biggest changes since GST was launched.

Why the upcoming meeting matters

The last full meeting of the GST Council took place in December 2024, so the Council has not met for more than eight months. During this gap, the Prime Minister and the finance ministry unveiled “next‑generation” reforms. In his Independence Day speech on 15 August 2025, Prime Minister Narendra Modi promised a “Diwali gift” of lower tax rates and simpler compliance. The upcoming meeting, likely in August 2025 after the monsoon session, could bring key reforms.

Simplifying the rate structure

One of the biggest proposals is a major overhaul of GST rates. India currently has five main slabs: nil, 5%, 12%, 18% and 28% plus special rates for precious metals. Around 21 % of goods fall in the 5% slab, 19 % in the 12% slab, and 44 % in the 18% slab. Officials are exploring removing the 12% slab and shifting its items to either 5% or 18%.

Going further, the Centre has proposed a two‑slab system: 5% and 18%, with a 40% “sin tax” on a handful of demerit goods such as tobacco, pan masala, and online gaming.

Under this plan, 99 % of items currently taxed at 12% would move to the 5% slab, while 90 % of items taxed at 28% would move to 18%.

The 40% rate would only apply to approximately seven items, and cement and white goods might be reduced to 18%.

The aim is to simplify compliance and make everyday goods cheaper; the finance ministry says this would boost consumption and make essential and aspirational products such as refrigerators, packaged food, and medical supplies more affordable.

The proposal is ambitious and will require careful item‑by‑item review of about 1,500 categories.

Rate rationalization and specific sectors

Alongside the overall slab overhaul, the Council is expected to discuss sector‑specific rate tweaks. The New Indian Express reports that the meeting may merge the 12% and 18% slabs, reducing the number of slabs from five to four. Items under scrutiny include fertilizers, footwear, textiles, and restaurant services in luxury hotels. A GoM has also examined GST on life and health insurance. According to sources, the panel has recommended no GST on health insurance premiums when the sum insured is up to ₹5 lakh, while other health policies would attract 18% GST. For term life insurance – pure protection plans that pay out only on death – the majority of members favour a complete waiver. The Council will decide whether to adopt these recommendations.

Decriminalization and compliance reforms

Another important agenda item is decriminalization. Amendments to Sections 132 and 138 of the Central GST Act, already approved in principle, aim to relieve traders from arrest and prosecution for minor offences. These changes need legislative backing and could be taken up in the meeting.

Businesses also expect clarity on the rules for the GST Appellate Tribunal (GSTAT). For the last few years, the absence of a functioning tribunal has forced taxpayers to approach the High Courts. The Council’s 49th meeting recommended setting up the GSTAT, and the upcoming meeting may announce its benches, locations, and timelines. Fine‑tuning of the GSTAT Procedure Rules 2025, including the time limit to file appeals and the definition of a “certified copy”, is expected.

The Council is also likely to consider extending the amnesty scheme under Section 128A. Many taxpayers missed deadlines to file returns for 2018‑19 and 2019‑20; industry groups are demanding an extension beyond 31 August 2025 and a waiver of late fees for nil returns. To make compliance easier, proposals include automatic matching of input tax credit on the GST portal, quarterly auto‑reconciliation for small businesses, and guidelines for unblocking credits. Housing societies and joint development agreements may receive clarity on whether maintenance charges above ₹7,500 and landowner‑developer revenue sharing attract GST.

Compensation cess and the big picture

Compensation cess, an additional levy on items such as cigarettes, cars, and soft drinks, was introduced to offset states’ revenue losses after GST was rolled out. The cess will continue until 31 March 2026 to repay loans taken during the pandemic. Officials are discussing whether to merge this cess with the main GST rates or subsume it into the proposed 40% sin tax.

Prime Minister Modi’s announcement signals that reforms will reach consumers before Diwali. The changes aim to correct inverted duty structures (where inputs are taxed higher than finished goods), reduce disputes over classifications, and make the tax regime more stable. A simpler GST could also support future free‑trade agreements and help Indian companies compete globally.

How might these changes affect you?

If the Council adopts the two‑slab proposal, many items now taxed at 12% or 28% could become cheaper. Everyday goods such as packaged food, household appliances, and medical supplies may see price cuts. Health insurance premiums for coverage up to ₹5 lakh could be exempt from GST, and term life policies might become tax-free. A simpler rate structure should reduce confusion, making it easier for shop owners and service providers to calculate tax correctly. Auto‑matching of input tax credit and a functioning appellate tribunal would speed up refunds and settle disputes faster.

However, the reforms could also mean some items move to higher tax brackets if states insist on protecting revenues. Implementation will likely be phased, and many details (like the exact list of items in each slab) will only be known once the Council’s decisions are published. States may negotiate special provisions to protect their finances, so compromises are inevitable.

Final thoughts

GST was introduced to create a single unified market across India. The upcoming GST Council meeting could bring the most significant overhaul yet, with rates slashed, slabs simplified, minor offences decriminalized, and compliance made easier. These changes are meant to reduce the tax burden for ordinary citizens and small enterprises while ensuring states continue to have the resources they need. As always in India’s cooperative federal structure, success will depend on agreement among the Centre and the states. Regardless of the final shape of reforms, the discussion itself shows that the tax system is evolving to better serve both businesses and consumers. The coming months will reveal whether 2025 becomes a landmark year for GST and whether that promised Diwali gift becomes reality.

DISCLAIMER

This article shares our understanding of the latest GST updates and is for general information only. Please consult a professional before making any decisions. We are not responsible for any loss that may arise from relying on this content.