GD Topic - GST Rate Changes After the 55th GST Council Meeting: Simplification or Complexity?

Candidates preparing for the Group Discussion Round for admission to the MBA programme for the academic year 2025-2026 must ensure they have information on current hot topics. One such hot topic that we will discuss in the article is the Changes in Goods and Services Tax (GST) Rates in India.

What makes a great MBA candidate? It’s not just high scores in MBA entrance exams like CAT, XAT, SNAP, NMAT, and MAH MBA CET but also the ability to think clearly, communicate effectively, and work well with others. The Group Discussion (GD) round is a major part of the MBA admission process, where candidates are evaluated on these skills. It helps identify those who can confidently express their ideas, critically analyze issues, and contribute meaningfully to a group discussion, which are the qualities companies look for in their future managers.

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Currently, GD rounds for the CAT exam are ongoing and GD rounds for other entrance exams are expected to be concluded by February 2025. Candidates preparing for the Group Discussion Round must check out the below article for information on the Changes in GST Rates in India.

Before understanding the new GST Rates in India, let’s first understand its meaning and types.

What is GST?

The Goods and Services Tax (GST) is a single, indirect tax implemented in India to create a unified taxation system across the country. The idea behind GST is to replace the multiple layers of taxes (like state and central indirect taxes) and make it simple for businesses and consumers with one tax (GST). It replaces 17 indirect taxes and 23 cesses of the states and centres. The motive behind the GST Act was 'One Nation and One Tax’. GST operates on a value-added system, where taxes are collected at each stage of production or distribution, but are ultimately borne by the end consumer. This is the reason why GST is classified as a destination-based consumption tax. The input credit is charged at every stage of a good or service to remove or avoid the cascading effect of taxes (tax on tax) and ensure a smooth flow of goods and services across state borders.

Types of Taxes under GST (Goods and Services Tax)

There are three types of taxes under GST; CGST, SGST, UTGST, and IGST.

Central Goods and Services Tax (CGST): It is a tax levied by the Centre on intrastate (within the same state) supply of goods and services.
State Goods and Services Tax (SGST): It is a tax levied by the State on intrastate (within the same state) supply of goods and services.
Union Territory Goods and Services Tax (UTGST): It is a counterpart of SGST and is levied by the Union Territories (UTs) of India on the supply of goods and services. UTGST is applicable in Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra and Nagar Haveli, and Lakshadweep.
Integrated Goods and Services Tax (IGST): It is a tax collected by the Central Government and levied on the interstate (between two states) supply of goods and services.

Taxes Replaced by GST (Goods and Services Tax)

The Goods and Services Tax (GST) in India replaced a total of 17 indirect taxes (8 Central Taxes and 9 State Taxes) and approximately 23 cesses previously levied by the central and state governments. These include

Central Taxes Replaced by GST:

Central Excise Duty
Service Tax
Additional Excise Duties
Additional Customs Duty (Countervailing Duty or CVD)
Special Additional Duty of Customs (SAD)
Central Sales Tax (levied by the Centre but collected by states)
Central Surcharges and Cesses related to supply of goods and services
Excise Duty under Medicinal and Toiletries Preparation Act

State Taxes Replaced by GST:

Value Added Tax (VAT)
Purchase Tax
Entertainment Tax (except those levied by local bodies)
Luxury Tax
State Cesses and Surcharges
Entry Tax/Octroi
Taxes on Advertisements
Taxes on Lotteries, Betting, and Gambling
Taxes on Goods and Passengers

Cesses Subsumed Under GST:

Krishi Kalyan Cess
Swachh Bharat Cess
Education Cess
Clean Energy Cess
Infrastructure Cess
Water Cess and so on.

Key Facts about GST

Single Tax Structure: The motive behind GST is to replace multiple taxes with one tax and make the price of goods and services uniform across India.
Introduction and Legal Framework: GST was introduced through the 101^st Constitutional Amendment Act in 2016. The GST Council, a constitutional body, was formed to make recommendations on tax rates, exemptions, and other GST-related issues.
GST Act: It is an Act that lays down the laws governing the implementation and administration of GST in India. The GST Act was passed on 29^th March 2017 in the Parliament of India and came into effect on 1^st July 2017.
Tax Slabs: The four tax slabs under GST are 5% (for consumer durables), 12% (general rate), 18% (general rate), and 28% (luxurious goods). Besides the four tax slabs, the GST rate for exports and supplies to the SEZs (Special Economic Zones) is 0%.
Input Tax Credit System: Input Tax Credit (ITC) allows businesses to reduce their GST liability by claiming credit for the GST paid on inputs (goods or services) used in production. This ensures tax is charged only on the value added at each stage of the supply chain, preventing the cascading effect of taxes. Ultimately, the final consumer bears the GST levied by the last supplier.

Also Read: Union Budget 2024: Are the New Income Tax Slabs a Win for the Middle Class?

Latest GST Rate List for Goods and Services in 2025

During the 55th GST Council Meeting several changes were made in the GST Rates in India. Below is the list of goods and services covered under different tax slabs (0%, 5%, 12%, 18%, and 28%).

List of Items Taxed at 0% GST Rate

Products	GST Rate
Milk	0%
Kajal	0%
Eggs	0%
Educational Services	0%
Curd	0%
Lassi	0%
Health Services	0%
Children’s Drawing & Colouring Books	0%
Unpacked Foodgrains	0%
Unbranded Atta/Maida	0%
Unpacked Paneer	0%
Gur	0%
Besan	0%
Unbranded Natural Honey	0%
Fresh Vegetables	0%
Salt	0%
Prasad	0%
Palmyra Jaggery	0%
Phool Bhari Jhadoo	0%

List of Items Taxed at 5% GST Rate

Products	GST Rate
Sugar	5%
Packed Paneer	5%
Tea	5%
Coal	5%
Edible Oils	5%
Raisin	5%
Domestic LPG	5%
Roasted Coffee Beans	5%
PDS Kerosene	5%
Skimmed Milk Powder	5%
Cashew Nuts	5%
Footwear (< Rs.500)	5%
Milk Food for Babies	5%
Apparels (< Rs.1000)	5%
Fabric	5%
Coir Mats	5%
Matting & Floor Covering Spices	5%
Agarbatti	5%
Mishti/Mithai (Indian Sweets)	5%
Life-saving drugs	5%
Coffee (except instant)	5%

List of Items Taxed at 12% GST Rate

Products	GST Rate
Butter	12%
Ghee	12%
Processed food	12%
Almonds	12%
Mobiles	12%
Fruit Juice	12%
Preparations of Vegetables	12%
Fruits	12%
Nuts or other parts of Plants, including Pickle Murabba	12%
Chutney	12%
Jam	12%
Jelly	12%
Packed Coconut Water	12%
Umbrella	12%

List of Items Taxed at 18% GST Rate

Products	GST Rate
Hair Oil	18%
Capital goods	18%
Toothpaste	18%
Industrial Intermediaries	18%
Soap	18%
Ice-cream	18%
Pasta	18%
Toiletries	18%
Corn	18%
Flakes	18%
Soups	18%
Printers	18%
Computers	18%

List of Items Taxed at 28% GST Rate

Products	GST Rate
Small cars (+1% or 3% cess)	28%
High-end motorcycles (+15% cess)	28%
Consumer durables such as AC and fridge	28%
Luxury & sin items like BMWs	28%
Cigarettes and aerated drinks (+15% cess)	28%

GST Rate Changes in 2024

On December 21, 2024 the 55^th GST Council Meeting was held in Jaisalmer, Rajasthan to oversee operations and reforms of the indirect tax, under the chairpersonship of Union Finance Minister Smt. Nirmala Sitharaman. During the meeting, the GST Council inter-alia made some recommendations related to the changes in GST tax rates to provide relief to individuals, measures facilitating trade, and streamlining compliance with Goods and Services Tax. The following are the recommendations made:

GST Rate Changes on Goods

1. Fortified Rice Kernel (FRK): GST reduced to 5% (HSN 1904).

2. Gene Therapy: GST exemption.

3. LRSAM System: Extension of IGST exemption to systems, sub-systems, components, and tools for assembly/manufacture under specified conditions.

4. Merchant Exporters: Reduction of Compensation Cess to 0.1% on supplies, aligning with the GST rate on such supplies.

5. IAEA Inspection: Exemption of IGST on imported equipment and consumables for inspection teams under specific conditions.

6. Food Inputs for Distribution: Extension of concessional 5% GST rate for food preparations under HSN 19/21 supplied for free distribution to economically weaker sections via government programs.

GST Rate Changes on Services

1. Sponsorship Services: To be taxed under the Forward Charge Mechanism.

2. Motor Vehicle Accident Fund: GST exemption on contributions from third-party motor vehicle premiums by insurance companies.

3. Hotels & Restaurants:

GST linked to the value of accommodation in the preceding financial year:
- 18% with ITC: If the value exceeds ₹7,500/unit.
- 5% without ITC: Otherwise.
Hotels can opt for 18% with ITC by declaration before the financial year starts.
These changes will be effective from 04.2025 to ensure a smooth transition.

4. Composition Taxpayers: Exempted from reverse charge mechanism (RCM) on renting commercial property by unregistered persons. The period from 10.10.2024 to the new notification will be regularized “as is where is.”

Other Changes (Goods & Services)

1. Used Vehicles: Increase in GST from 12% to 18% for all old and used vehicles, including EVs.

Applicability: Only on the margin value (difference between purchase and selling price or depreciated value if claimed).
Not applicable to unregistered persons.

2. ACC Blocks: Autoclaved Aerated Concrete blocks with >50% fly ash to fall under HSN 6815 and attract 12% GST.

3. Agricultural Produce: No GST on pepper (fresh/dried) and raisins supplied by agriculturists.

4. Pre-Packaged Goods: Definition expanded to include commodities ≤25 kg/litre, under retail sale regulations, per Legal Metrology Act.

5. Popcorn Taxation:

5% GST: Popcorn mixed with salt/spices (non-prepackaged).
12% GST: Popcorn mixed with salt/spices (prepackaged).
18% GST: Caramelized popcorn (sugar confectionery, HSN 1704 90 90).
Regularization: Past disputes will be resolved “as is where is.”

(Note: Critics argued that these multiple tax rates complicated business operations, contradicting the simplicity intended by the 2017 GST reform, on which the government clarified that these distinctions were responses to requests for clarity by certain field units and not new taxes.)

6. Ground Clearance for Vehicles: Explanation in Sl. No. 52B of Notification 1/2017-Compensation Cess applies from 26.07.2023.

7. Payment Aggregators:

RBI-regulated Payment Aggregators qualify for GST exemption under Sl. No. 34 of Notification 12/2017-CT(R).
Excludes payment gateways and fintech services without fund settlement.

8. Penal Charges: No GST on penalties levied by banks/NBFCs for non-compliance with loan terms.

Conclusion

The GST rate changes made during the 55th GST Council Meeting aim to make the tax system easier while addressing the needs of different sectors. By reducing rates on essential items like fortified rice kernels, exempting life-saving therapies like gene therapy, and clarifying tax rules for products like popcorn and ACC blocks, the Indian government is trying to support businesses and individuals. However, the increased rates on used vehicles and added detailed rules for some items might still create challenges. Overall, these changes are a move towards simplifying GST and making it fairer, while ensuring it supports India’s economy.