GST Council Meeting on September 3–4: Big Tax Cuts, Two-Slab System, and Festive Relief Likely

New Delhi, August 27, 2025 – The Goods and Services Tax (GST) Council will hold its 56th meeting on September 3 and 4, 2025, in New Delhi. The meeting will start at 11 AM on both days and will be chaired by Union Finance Minister Nirmala Sitharaman along with finance ministers of all states and union territories. This meeting is one of the most important gatherings in recent years because the Council is expected to take several bold decisions that could change how GST works for businesses and consumers across India.

The focus will be on simplifying GST slabs, reducing tax rates, and bringing relief before the festive season. The meeting comes after the Prime Minister announced “next-generation GST reforms” earlier this year, raising expectations that the indirect tax system will be made easier and fairer for all.

Major Agenda Items on the Table

Move Towards a Two-Slab GST Structure

Currently, GST has multiple tax slabs – 5%, 12%, 18%, and 28%. This creates confusion for both businesses and consumers. The Council is considering a major reform to introduce just two slabs – 5% and 18%. Luxury and sin goods such as tobacco and liquor could remain under a higher 40% slab, but the middle categories will be rationalised.

Experts say that this move will help reduce disputes and litigation. For example, several textile and food items have faced classification issues in the past, with businesses struggling to decide whether the product falls under 5% or 12%. By eliminating the 12% slab, the process will become clearer.

Bringing All Food and Textile Goods Under 5%

A key proposal is to bring all food and textile items under the 5% slab. This would not only make everyday essentials cheaper but also support industries that employ millions of workers. Textile manufacturers, especially small and medium businesses, have long demanded a uniform low rate. If approved, clothes, garments, and processed food items could all become more affordable in the coming months.

GST Cut on Cement

Another big decision on the agenda is the reduction of GST on cement from 28% to 18%. Cement is a crucial input for housing and infrastructure projects. High taxes on cement increase the cost of construction, making houses expensive for middle-class families. If this proposal is passed, it could bring down the price of homes and boost the real estate sector. It will also help the government’s “Housing for All” mission.

Relief for Salon and Beauty Services

Currently, salon and beauty parlour services are taxed at 18%. The Council is likely to consider shifting these services to the 5% slab. This will directly benefit urban middle-class consumers who spend regularly on grooming services. More affordable services will also encourage small beauty businesses to expand, creating job opportunities.

Insurance Tax Exemption

The government is also examining a proposal to remove GST on life and health insurance premiums. At present, these policies attract 18% GST, which adds to the burden on policyholders. If approved, this move will make insurance more affordable and could encourage more people to take coverage. While insurance companies warn they might lose input tax credits, the long-term benefit for consumers could be significant.

Removal of 12% and 28% Slabs

In addition to these changes, the Council may completely eliminate the 12% and 28% slabs. Goods that are currently taxed at 12% will likely shift to 5%, and those at 28% will move to 18%. The idea is to have a simpler system that businesses can comply with more easily.

Why This Meeting Matters

Timing Before Festive Season

The meeting comes just weeks before Navratri and Diwali, India’s biggest shopping festivals. Reports suggest that the government plans to implement the new rates by September 22, 2025, so that consumers can enjoy lower prices during the festive season. This timing is crucial, as festive sales account for a large portion of annual retail business in India. Lower GST rates could boost consumption and give a much-needed push to the economy.

Relief for Middle-Class Families

Food, clothing, housing materials, and services like salons are part of everyday household expenses. Any tax cut in these areas will directly reduce monthly budgets for middle-class families. For example, if GST on cement falls, the cost of new homes could drop by several lakhs. Similarly, insurance premiums and grooming services will become cheaper.

Boost for Businesses and MSMEs

For small businesses, especially in textiles, food processing, and services, fewer GST slabs will mean fewer compliance headaches. They will spend less time dealing with classification disputes and more time focusing on growth. A simple two-slab system will also reduce legal battles and improve trust between businesses and tax authorities.

Pressure From States Over Revenue Loss

While consumers and businesses may welcome tax cuts, several states are worried about revenue loss. States like Kerala have already highlighted that their GST collections have been falling since the end of the five-year compensation period. Kerala reported a revenue loss of ₹21,955 crore last year and expects another loss of around ₹8,000–10,000 crore this year. State finance ministers argue that tax cuts should not come at the cost of welfare spending, salaries, and public services.

Caution From CBIC

The Central Board of Indirect Taxes and Customs (CBIC) has also warned stakeholders to avoid market speculation. In the past few weeks, social media has been flooded with rumours about GST cuts. CBIC clarified that official decisions will only be announced after the Council meeting. Businesses and traders are advised not to take premature steps based on unverified news.

Key Sectors That May Benefit

1. Textile & Apparel – Clothes, garments, and fabrics may all come under 5%, giving relief to both buyers and manufacturers.
2. Food Industry – Packaged food, dairy products, and processed goods could get cheaper.
3. Construction & Real Estate – A cut in cement GST will reduce housing costs and help infrastructure projects.
4. Salon & Beauty Industry – Lower rates will attract more customers and benefit small entrepreneurs.
5. Insurance Sector – Exemption from GST will make life and health insurance more affordable, increasing penetration in rural and semi-urban areas.

What Happens Next

The Council will meet for two days and discuss all these proposals in detail. Once a decision is made, the Finance Ministry will issue official notifications. If all goes as planned, the changes may roll out by September 22, 2025, just before the festive season begins. Consumers, traders, and industry leaders are all waiting eagerly for the outcome.