GST Council Revises Slabs: 5%, 18% and 40%, Relief for Small Cars & ACs

Date: 4th September 2025
Author: Abhishek Kumar Jha

The 56th meeting of the GST Council, held on 3rd September 2025, has brought significant changes to the indirect tax structure in India. With an aim to simplify rates and provide relief to consumers, the Council announced revised GST slabs of 5%, 18% and 40%, along with key cuts for small cars and air conditioners.

Key Highlights of the Meeting

1. Revised GST Slabs

The Council has streamlined GST rates into three major slabs:

  • 5% Slab – For essential goods and select services.
  • 18% Slab – For most standard goods and services.
  • 40% Slab – For luxury and sin goods.

This restructuring is expected to reduce disputes, simplify compliance, and make tax administration more transparent.

2. Relief for Consumers

  • Small Cars: GST rate reduced to make entry-level vehicles more affordable.
  • Air Conditioners (ACs): GST cut to encourage sales and boost the appliance sector.

This move is aimed at providing relief to middle-class consumers while also stimulating demand in the automobile and consumer durables industries.

3. Implementation Timeline

  • New GST rates on services → effective from 22nd September 2025.
  • New GST rates on goods → applicable from the same date, except for specific items like:
    • Pan Masala
    • Gutkha
    • Cigarettes
    • Chewing tobacco (zarda)
    • Unmanufactured tobacco

What It Means for Businesses and Consumers

  • Businesses: Need to update billing systems, ERP software, and pricing strategies before the new slabs come into effect.
  • Consumers: Will see reduced costs in small cars and ACs, while luxury and sin goods remain heavily taxed.
  • Government: Aims to balance revenue generation with affordability and compliance ease.

Related Legal Developments

Apart from GST, several important tax rulings were highlighted recently:

  • Bombay High Court: Assessing Officer can fix property annual value higher than municipal rateable value (Sec. 22, Income Tax Act).
  • Delhi High Court: Customs should adopt a supportive approach towards start-ups and MSMEs.
  • Ahmedabad CESTAT: Refund of CVD & SAD post-GST introduction is valid under Sec. 142(3), CGST Act.
  • New Delhi CESTAT: ADG DRI cannot declare DEPB scripts issued by DGFT as null and void.

Final Thoughts

The 56th GST Council Meeting marks another step towards simplifying India’s GST regime. With reduced slabs and targeted relief for essential sectors, the government is trying to strike a balance between consumer affordability and revenue collection. Businesses must gear up for compliance changes before the 22nd September 2025 deadline.

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