The 56th Goods and Services Tax (GST) Council meeting is scheduled to take place on September 3 and 4, 2025, in New Delhi. This key meeting, chaired by the Union Finance Minister Nirmala Sitharaman and comprising finance ministers from all states and Union Territories, will address critical issues related to the GST framework in the country. An officers' meeting will precede the council meeting on September 2, 2025.

A primary agenda item is the potential move to a two-rate GST structure. The Centre has proposed this change, suggesting the removal of the 12% and 28% tax slabs, retaining only 5% and 18% slabs. There is also a proposal to levy a special rate of 40% on select items like ultra-luxury cars, sin goods such as tobacco, and online gaming. This proposal follows Prime Minister Narendra Modi's Independence Day announcement of "second generation" GST reforms, calling it a "Diwali gift" for the people. The aim is to simplify the tax structure and ease compliance.

The Group of Ministers (GoM) on Rate Rationalisation has already supported the Centre's proposal for a two-slab GST. Bihar Deputy Chief Minister and Chairperson of the GoM Samrat Choudhary said that they would recommend the two-rate structure proposal to the GST Council.

However, concerns have been raised by members from opposition-ruled states regarding the potential revenue shortfall post the two-rate structure. West Bengal Finance Minister Chandrima Bhattacharya stressed the importance of quantifying the potential revenue loss and determining how to compensate the states.

Tax experts have generally welcomed the proposal, stating it would simplify the system and boost consumption. However, they also cautioned that issues like the inverted duty structure need to be addressed for the reform to be fully effective. Experts note the importance of clarity and guidelines on passing on the benefits of rate changes to consumers. Transitional measures to protect distributors and branches, along with a strong anti-profiteering framework, will also be critical.

If the proposed changes are implemented, essential goods and daily-use items are likely to be classified under the 5% slab, while most other goods and services will fall under the 18% slab. Items currently under the 28% slab may be moved to the 18% slab. Health and life insurance premiums may also see a GST reduction, potentially going from 18% to 5% or even nil.

The GST Council will further deliberate on recommendations by the three GoMs on rate rationalization, compensation cess, and health and life insurance. The GST Council plays a crucial role in shaping the GST policy framework. The outcome of the meeting could significantly impact the Indian economy, affecting households, MSMEs, and various industries.