The 56th GST Council is scheduled to meet on September 3–4, 2025, with a key agenda of rationalising the existing goods and services tax (GST) rate structure. Earlier in August 2025, the Centre proposed replacing the current seven-tier structure of nil, 0.25 per cent, 3 per cent, 5 per cent, 12 per cent, 18 per cent, and 28 per cent with a simplified three-rate structure of 5 per cent and 18 per cent, along with a higher 40 per cent slab for sin goods such as tobacco and alcohol, as well as luxury items.
Many goods currently taxed under the 12 per cent slab will likely be reduced to 5 per cent, and items currently taxed under 28 per cent will likely see 18 per cent GST.
Key Sectors In Focus
As the GST Council meeting is set to start, market participants are speculating which sectors are likely to emerge as the winners and which ones as the losers. Let's take a look at the key sectords in focus.
Auto sector
Small cars and entry level two-wheelers are expected to come down to 18 per cent from 28 per cent. "We feel there is a higher probability of a GST rate cut (70-85%) for 2Ws and compact cars," analysts at InCred Equities said in a note dated September 2.
Consumer durables and electronics
Items like air conditioners (ACs), large televisions (TVs) and dishwashers, which are currently taxed under the 28 per cent slab, are likely to come down to the 18 per cent slab. "Room ACs and TVs (>32 inches) could potentially see a cut in the GST rate from 28 per cent to 18 per cent," said Kotak Securities in a note dated August 17.
FMCG and essentials
According to several media reports, fast-moving consumer goods (FMCG) like shampoos, toothpaste and talcum powder are likely to come down to 5 per cent from the existing 18 per cent. Goods like milk powder, cooking oils, noodles, chocolates and sugar, currently taxed at 12 per cent, are expected to come under 5 per cent.
Cement
Premium brands are expected to benefit if GST rate is cut from the current 28 per cent to 18 per cent.
Ceramics and tiles
The Morbi ceramics industry, a massive ceramic manufacturing hub in Gujarat, has sought a reduction from 18 per cent to 5 per cent. In its representation, the Morbi Ceramic Manufacturers Association (MCMA) argued that the tiles are wrongly classified as luxury products. "For poor and middle-income families, tiles are not a luxury but a necessity for luxury housing," the industry body said, as reported by The Times of India on August 27.
Insurance
Bihar Deputy Chief Minister and convenor of insurance GoM Samrat Choudhary had last week said that the Centre has proposed exempting life and health insurance premium from GST. Currently, life and health insurance premiums attract 18 per cent GST.
Tyres
The Automotive Tyre Manufacturers Association (ATMA), which represents six major tyre companies accounting for over 90 per cent of tyre production in India, has requested a reduction in GST rates, The Hindu reported on September 1. Currently, most automotive tyres are taxed at 28 per cent, while tractor tyres attract 18 per cent GST, and aircraft tyres are taxed at 5 per cent.
Sin Goods
Goods like tobacco, alcohol and gaming, currently under the 28 per cent slab, are likely to attract a higher 40 per cent tax rate.
Why the 56th GST Council Matters
Major Tax Overhaul: The 56th GST Council meeting is being touted as the biggest tax overhaul in the past eight years.
Economic Relief: Finance Minister Nirmala Sitharaman, during a meeting of the Group of Ministers (GoM) on August 20, stated that the GST rate rationalisation is aimed at providing greater relief to the common man, farmers, the middle class, and micro, small, and medium enterprises (MSMEs).
Boost Consumer Demand: The tax cuts are expected to improve consumer demand. A study by the National Institute of Public Finance and Policy (NIPFP), an autonomous think tank under the Ministry of Finance, found that the GST impact multiplier is -1.08. This means a cut in GST rates can have a positive effect by increasing private consumption through higher disposable income. Unlike income tax or corporate tax, GST has the strongest multiplier effect as it is an indirect tax applied to all consumers at the point of purchase.
Increase Tax Base: GST simplification might also bring more businesses, currently outside the system, into the tax net. "Simplification of the rate structure could mean some businesses that have been avoiding the GST system to evade taxes may now join it. Several MSMEs may realise that the benefits of being part of the formal economy will soon outweigh the cost of paying taxes. This will ultimately help expand the GST tax base," analysts at Ambit Institutional Equities said in a note.
