The 56th meeting of the GST Council, convened on September 3, 2025, in New Delhi, approved the next-generation GST reforms with a multi-sectoral and multi-thematic focus on improving the lives of all citizens and ensuring ease of doing business for all, including small traders and businessmen. The approved reforms embody the vision of Prime Minister Shri Narendra Modi and represent a strategic, principled, and citizen-centric evolution of a landmark tax framework, which will enhance the quality of life of every citizen.
The 56th meeting of the GST Council, convened on September 3, 2025, in New Delhi, approved the next-generation GST reforms with a multi-sectoral and multi-thematic focus on improving the lives of all citizens and ensuring ease of doing business for all, including small traders and businessmen. The approved reforms embody the vision of Prime Minister Shri Narendra Modi and represent a strategic, principled, and citizen-centric evolution of a landmark tax framework, which will enhance the quality of life of every citizen.
1This rationalization of GST to lower levels provides a variety of stimulants to the sector and encourages a virtuous cycle of economic growth through the following:
Simplified Tax Structure: The simplified tax structure brings uniformity across food items with a reduction in the number of tax slabs from four to two. A stable tax environment is being built to help businesses plan long-term investments, encourage compliance, and drive economic growth.
Reduced Prices: The consumers shall witness overall reduced food prices, making staples more affordable. This, in turn, stimulates consumer demands, and FMCG and packaged food businesses are expected to see an uptick in sales. Additionally, the simplification aids businesses by reducing compliance costs and lowering litigation risk.
Inverted Duty Structure: The new structure helps correct inverted duty cases, e.g., when inputs were taxed higher than finished products. This provides immediate relief for strengthening the value chains in the food sector, improving liquidity, especially for MSMEs, reducing working capital blockage and promoting domestic value addition.
Resolving Classification Issues: The new structure eliminates classification disputes arising from varying tax rates for similar products. For example, packaged vs. loose paneer or parathas previously had different rates, but now follow a clearer structure and greatly reduce classification disputes.
Other Procedural Reforms: Besides rate cuts, the Council approved procedural reforms through streamlined registration and return filing, provisional refund mechanisms especially for inverted duty claims and implementation of GSTAT (Goods and Services Tax Appellate Tribunal) to expedite appeal resolution and reduce litigation.
Boost to Processed Food Industry: Overall, the manufacturing sector is set for a boost. The lower GST rates on consumer goods and the resultant lower prices could potentially set off a virtuous cycle of increased demand and growth for the industry. The overall industry have following positives:
· Consumption: GST rate cuts will result in lower retail prices, which in turn will increase demand for manufactured products, including processed food products.
· Investment: With increased demand and positive business sentiment and a reduction in compliance burden, investments are expected to rise.
· Employment: With increased demand, expected rise in investment and formalization of industry, more employment opportunities are expected to be generated in the sector and the economy as a whole.
· Increased Income Level for Farmers and Food Processors: The incomes and remunerations of the farmers and food processors are expected to rise by way of an increase in consumption and investment in the economy, increasing the food-processing infrastructure, level of processing and value addition and reduction in post-harvest losses.
|
S. No. |
Product Description |
GST (%) |
|
|
From |
To |
||
|
01 |
Ultra-High Temperature (UHT) milk |
5% |
Nil |
|
02 |
Condensed milk |
12% |
5% |
|
03 |
Almonds |
12% |
5% |
|
04 |
Malt, whether or not roasted |
18% |
5% |
|
05 |
Sugar boiled confectionery |
12% |
5% |
|
06 |
Sugar confectionery |
18% |
5% |
|
07 |
Cocoa butter, fat & oil and cocoa powder |
18% |
5% |
|
08 |
Chocolates and other food preparations containing cocoa |
18% |
5% |
|
09 |
Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared, such as spaghetti, macaroni, noodles, lasagne, gnocchi, ravioli, cannelloni; couscous |
12% |
5% |
|
10 |
Pastry, cakes, biscuits and other bakers’ wares, whether or notcontaining cocoa; communion wafers, empty cachets of a kindsuitable for pharmaceutical use, sealing wafers, rice paper andsimilar products |
18% |
5% |
|
11 |
Extruded or expanded products, savoury or salted |
12% |
5% |
|
12 |
Vegetables, fruit, nuts and other edible parts of plants, preparedor preserved by vinegar or acetic acid |
12% |
5% |
|
13 |
Jams, fruit jellies, marmalades, fruit or nut purée and fruit ornut pastes |
12% |
5% |
|
14 |
Fruit or nut juices (including grape must) and vegetable juices |
12% |
5% |
|
15 |
Soups and broths and preparations therefor; homogenizedcomposite food preparations |
18% |
5% |
|
16 |
Ice cream and other edible ice, whether or not containing cocoa |
18% |
5% |
|
17 |
Namkeens, bhujia, mixture, chabena and similar ediblepreparations |
12% |
5% |
|
18 |
Plant-based milk drinks, ready for direct consumption asbeverages |
18% |
5% |
|
19 |
Soya milk drinks |
12% |
5% |
|
20 |
Fruit pulp or fruit juice based drinks (other than CarbonatedBeverages of Fruit Drink or Carbonated Beverages with Fruit Juice) |
12% |
5% |
The changes came into effect from September 22, 2025 addresses the long-standing inverted duty structures, where inputs were taxed at higher rates than finished products and it also aims to help in keeping the consumers' money in their pocket, increasing the purchasing power and also help in countering the US Tariffs on Indian goods. By correcting these distortions, the reform has reduced the working capital blockages and improved liquidity across food value chains. This step is especially beneficial for MSMEs, which often face financial constraints, and promotes greater domestic value addition by making processing activities more viable. The new GST structure reduces from four slabs (5%, 12%, 18%, 28%) to two main rates - 5% (merit rate) and 18% (standard rate), along with a 40% special rate for sin/luxury goods.
|
Old Structure (GST Slab) |
5%, 12%, 18%, 28% |
|
|
New Structure |
5% (essential goods), 18% (standard goods and services), and 40% (sin & luxury goods) |
|
The simplified GST structure has brought uniformity across a wide range of food items, reducing classification ambiguities that previously resulted in disputes and litigation burdens. Similar goods are now placed under the same tax slab, lowering compliance costs and administrative burden. This predictable tax environment also encourages long-term investment planning and inspires voluntary compliance, particularly among small traders and micro, small, and medium enterprises (MSMEs). One of the most immediate impacts of GST rationalisation is the reduction in retail prices of staple and processed food products. Lowered tax incidences has enhanced the affordability and directly improved consumer welfare. This price effect is expected to stimulate demand, particularly in fast-moving consumer goods (FMCG) and packaged food segments, thereby generating a virtuous cycle of higher production, increased capacity utilisation, and employment.
Beyond this, the GST Council has also approved several administrative reforms aimed towards improving the overall tax ecosystem. These include the streamlining of registration and return filing processes, faster provisional refunds, particularly for inverted duty claims and the operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT). These measures cumulatively will help to reduce litigation, expedite dispute resolution, and enhance trust between taxpayers and the administration. The processed food industry stands to gain significantly from GSTAT as lower rates reduce input costs and retail prices, leading to higher consumption. Improved business sentiment and reduced compliance burdens will also encourage fresh investments, while increased demand and formalisation are likely to generate additional employment. Over time, these changes are expected to raise income levels for both farmers and food processors through higher processing intensity, better infrastructure, and reduced post-harvest losses.
GST 2.0 holds critical importance for India’s agriculture and food economy, a sector that supports the livelihoods of nearly 246 per cent of the population, either directly through farming or indirectly through food processing, trade, logistics, and allied activities. This structural dependence makes the sector particularly sensitive to both domestic policy shifts and external trade disruptions. At present, international agri-food markets are marked by heightened volatility, exacerbated by tariff measures imposed by the United States, which have affected price competitiveness and export sentiment. In this context, the Government of India’s decision to significantly reduce GST on staple and processed food products under the new GST regime represents a strategic intervention aimed at strengthening domestic demand while enhancing cost efficiency across the value chain. This creates a domestic absorption mechanism for agricultural and processed food output that might otherwise face export constraints due to tariffs or geopolitical uncertainties. According to 3NABARD’s report, agricultural and processed food exports to the United States account for a limited share and are estimated in the low to mid-teens as a percentage of India’s total agri-food exports, which indicates that while U.S. tariffs are disruptive, their overall macroeconomic impact is manageable if export diversification is pursued strategically.
In parallel, the government’s sustained focus on expanding India’s trade architecture through Free Trade Agreements strengthens the external dimension of this reform. The recently finalised FTAs with UK, Oman (CEPA) and New Zealand and European Union (EU), along with advanced negotiations with the Eurasian Economic Union (EAEU) led by Russia, are expected to open new and more stable markets for Indian agri-food products. Together, domestic tax rationalization and expanded market access create a mutually reinforcing framework that strengthens value addition, enhances price competitiveness, and integrates Indian agri-food producers more deeply into global value chains. Ultimately, GST 2.0 positions India to move from a volume-driven exporter to a value-driven, standards-compliant trading nation.