Late on Wednesday, the GST Council introduced a new 40 per cent special GST slab, after concluding a full day’s meeting. The new rate of 40 per cent — the highest under the indirect tax system launched in 2017 so far — targets sin and ultra-luxury goods, including pan masala, gutkha, cigarettes and other tobacco products. It also applies to items such as carbonated beverages, caffeinated drinks, luxury cars, high-end motorcycles, and aircraft, according to Finance Minister Nirmala Sitharaman, who detailed key recommendations in a rare 10 pm press conference in New Delhi.
The move is set to discourage consumption of harmful products and to balance revenue losses from sweeping cuts on essentials, healthcare, education, and automobiles.
The announcements came as the GST Council — chaired by the Union finance minister — concluded its day long meeting with sweeping recommendations aimed at easing the tax burden on the common man. The “next-gen” GST reforms follow the Union Budget for FY26, announced in February, with a clear focus on farmers and the middle class.
Add Zee Business as a Preferred Source
The changes will take effect in phases starting September 22, said the finance minister. Read more on what FM Nirmala Sitharaman said in 10 pm presser on September 3 unveiling GST 2.0 reforms
Here are 10 key recommendations made by the GST Council after its 56th meeting, held on Wednesday, September 3:
- The GST Council gave the nod to large-scale duty cuts across daily essentials, farm inputs, healthcare items, education supplies and automobiles. Packaged dairy, paneer, milk (UHT type), notebooks, pencils, shampoos and toothpaste will now either attract a 5 per cent levy or move to the nil category.
- Farm goods such as tractors, tyres, irrigation equipment, and bio-pesticides have also been brought down to 5 per cent.
- Critical medicines — including drugs used in the treatment of cancer and rare-disease — have been exempted entirely.
- Automobile prices will see a major correction in some categories, with small cars, motorcycles, three-wheelers, and commercial vehicles moved from the 28 per cent slab to 18 per cent.
ALSO READ: Next-Gen GST Reforms: What gets cheaper in PM’s ‘big Diwali gift’ tax cuts| Full list
- Cement — a key construction material for real estate and infrastructure developers — has been slashed to 18 per cent from 28 per cent.
- To further ease compliance, the GST Council endorsed a system of 90 per cent provisional refunds for inverted duty structures.
- With these decisions, the Council has pitched the reforms as more than just a rationalisation exercise, calling them “structural changes” designed to make GST simpler, fairer and aligned with the government’s Ease of Living and Ease of Doing Business agenda.
- On services, the Council approved exemptions on individual health and life insurance, floater policies, and senior citizen covers.
- The operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT), which will begin accepting appeals later this month and start hearings by December.
- The tribunal will serve as the National Appellate Authority for Advance Ruling, a move expected to strengthen institutional mechanisms and boost certainty for taxpayers.
