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Take a look at the essential concepts, terms, quotes, or phenomena every day and brush up your knowledge. Here’s your current affairs 2025 knowledge nugget on the 56th GST Council.
(Relevance: Frequent questions have been asked by UPSC in both Prelims and Mains examinations on this topic. The recent rationalisation of the GST is a major step towards the fulfillment of the primary objective of introducing GST.)
The Goods and Services Tax (GST) Council, in its 56th meeting cleared the next-generation reforms under the eight-year old indirect tax regime. This effectively paves the way for a broad two-slab structure of 5 per cent and 18 per cent with a demerit rate of 40 per cent rate only for super luxury, sin and demerit goods. All the rate changes, except those for tobacco and tobacco-related products, will come into effect from September 22, the first day of Navratri.
Being a constitutional body, the GST council meets periodically to deliberate and decide on various issues related to GST.
1. The GST regime came into force after the Constitutional (122nd Amendment) Bill was passed by both Houses of Parliament in 2016. It came into effect in 2017 and was billed as an attempt to simplify the existing tax structure in India, where both the Centre and states levied multiple taxes, and to make it uniform.
2. As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A. According to Article 279A, the GST Council shall consist of the Union Finance Minister (chairman) and Ministry of State in charge of Revenue; the Minister in charge of Finance or Taxation, or any other Minister, nominated by each state.
3. The decision within the Council is ought to be made by three-fourths majority of votes cast; Centre shall have a third of votes cast, states shall together have two-thirds. The mechanism for resolving disputes arising out of its recommendations may be decided by the Council itself.
4. According to Article 279, the council is meant to “make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”. It also decides on various rate slabs of GST, whether they need to be modified for certain product categories, and so on.
5. Article 279 A (5) of the Constitution prescribes that the GST Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel (ATF), also as per the Section 9(2) of the CGST Act, inclusion of these products in GST will require recommendation of the GST Council. Alcoholic liquor for human consumption as per Article 366(12A) are also excluded from the GST regime.
1. With the aim of lowering tax burden on common people, easing blocked working capital, and facilitating ease of doing business with automated refunds and registration process, the 56th GST Council introduced rationalisation of the GST tax regime.
2. With these reforms, the GST will now get rid of the multiplicity of slabs – 5 per cent, 12 per cent, 18 per cent and 28 per cent – with a broad two-slab structure – a merit rate of 5 per cent and a standard rate of 18 per cent – in addition to a special demerit rate of 40 per cent for super luxury, sin and demerit goods.
3. The products that are considered harmful to society, which may cause harm to the health, or if they are harmful by a moral prism are called “Sin goods”. This includes alcohol, tobacco, gambling or betting, food products with high fat or sugar content, and so on. Such goods and services are tax higher in a bid to dissuade people from using them.
4. Casinos, which earlier came under the 28 per cent GST slab will now fall under 40 per cent slab. Pan masala, cigarettes, and tobacco items to draw 40 per cent GST. Motorcycles above 350 cc, Aerated beverages with added sugar, and aircraft for personal use to attract a steep 40 per cent GST.
5. Ultra-high-temperature milk (used in baking), Indian breads (from pizza bread to khakra and roti), and packaged items (from namkeen to preserved meat) now attract lower or no tax. GST on smaller cars, air conditioners, and televisions has also been cut from 28% to 18%, which could boost sales.
6. The government has also scrapped the tax on premiums for term and health insurance policies for individuals, making them more accessible. However, group insurance plans, such as your employer-sponsored health or life schemes, will continue to attract an 18% GST. The GST rate on all electric vehicles will remain unchanged at 5 per cent.
1. Compensation cess was introduced to help states make up for the revenue they lost during the initial 5 years of GST implementation. This came under the GST (Compensation to States) Act, 2017. Subsequently, its levy was extended till March 2026, to service the loans raised during the Covid years for providing GST compensation to the states.
2. FM said that, “ Pan masala, cigarettes, gutkha, and other tobacco products such as chewing tobacco, products like zarda, unmanufactured tobacco and beedi will continue at their existing rates of GST and compensation cess, where applicable, until the loan and interest payment obligations under the compensation cess account are completely discharged.”
3. She said after the loan repayments are met, there will not be any cess and those items that attracted the compensation cess will attract a special rate of 40 per cent.
4. As per the Union Budget for 2025-26, the government expects to collect Rs 1.67 lakh crore as compensation cess in the current fiscal, with repayment to the tune of Rs 67,500 crore for these back-to-back loans scheduled for the year.
(1) What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’? (UPSC CSE 2017)
1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
(2) Consider the following items: (UPSC CSE 2018)
1. Cereal grains hulled
2. Chicken eggs cooked
3. Fish processed and canned
4. Newspapers containing advertising material
Which of the above items is/are exempted under GST (Good and Services Tax)?
(a) 1 only
(b) 2 and 3 only
(c) 1, 2 and 4 only
(d) 1, 2, 3 and 4
| Answer key |
| 1. (a) 2. (c) |
(Sources: Goods and Services Tax (GST) Bill, explained, Explained: What is the GST Council, and what does it do?, gstcouncil.gov.in )
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