GST moves to a two-rate structure of 5% and 18% with a 40% de-merit rate from 22 September 2025

At its 56th meeting on 3 September 2025 the GST Council approved the 'Next-Generation GST' rate rationalisation, collapsing the four-tier 5/12/18/28 structure into a merit rate of 5% and a standard rate of 18%, with a special de-merit rate of 40% for a small list of goods and services. The Council recommended that the revised rates on services, and on all goods other than pan masala, gutkha, cigarettes, zarda-type chewing tobacco, unmanufactured tobacco and bidi, take effect from 22 September 2025. Those excluded tobacco items were to stay at the pre-existing GST and compensation cess rates until the compensation cess loan and interest obligations were discharged, with the Finance Minister to decide the transition date separately.

The press release carries the full HSN-wise and sector-wise annexures. The separate transition for pan masala and tobacco was later tied to the commencement of the Health Security se National Security Cess on 1 February 2026 - see the HSNS entry below.

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