India’s GST: Key 2025 Trends to Watch

 

1. Simplification of Rate Structure

The 56th GST Council meeting (3 September 2025) replaced the four-slab system (5%, 12%, 18%, 28%) with a streamlined three-tier structure—5%, 18%, and 40%—effective 22 September 2025.

• Rationale: lower compliance costs, easier classification, and price clarity for consumers.
• 40% “demerit” slab is restricted to sin and luxury goods such as pan masala and sugary carbonated drinks.

2. Targeted Relief on Essentials

• Health and life-insurance premiums are now GST-exempt.
• Dairy products, 33 life-saving drugs, basic educational supplies, and most agri inputs move to the 0% or 5% slabs, cutting end prices.
• Small cars ≤350 cc, entry-level appliances, and electronic goods shift to 18%, down from 28%, aiming to revive demand in consumer-durables.

3. Collection Milestones

Despite slab cuts, revenue momentum remains strong:

Month (FY 2025-26)	Gross GST (₹ lakh crore)	YoY growth	Note
April 2025	2.37	12%	All-time monthly high
May 2025	2.01	16.4%	Imports up 25.2% YoY
July 2025	1.96	~10%	Domestic demand rebound
August 2025	1.86	6.5%	Seasonal dip pre-festive

FY 2024-25 closed at a record ₹22.08 lakh crore, up 9.4% YoY, underscoring broadening compliance and formalisation.

4. Economic Impact Outlook

• Finance Ministry projects the rate cuts will inject about ₹2 lakh crore into the economy, adding 50-70 bps to GDP growth over the next 4-6 quarters.
• NIPFP study finds GST reductions carry the largest fiscal multiplier (-1.08) among major tax instruments, signalling stronger demand stimulation versus income-tax cuts.
• Brokerage estimates foresee a 30 bps easing in consumer inflation in 2025-26 as lower indirect taxes feed through to prices.

5. Technology-Driven Compliance

AI-powered audits, e-invoice matching, and automated refund modules are tightening enforcement and accelerating cash-flows; July 2025 refunds surged 67% YoY to ₹27,147 crore. Expansion talks include bringing petroleum, online-gaming, and digital-asset transactions into GST’s net to widen the base.

6. What Businesses Should Do Now

– Re-map SKUs to new slabs; update ERP and billing systems by 22 September.
– Re-price inventory to reflect the 5%/18% shift; communicate price drops to capture demand.
– Monitor Council deliberations on merging 12% and 18% into a single 15% median rate—a proposal likely to resurface once revenue impact is clear.
– Strengthen e-invoicing readiness; mismatches trigger near-real-time notices under the revamped compliance architecture.

7. Consumer Takeaways

Lower GST on essentials, insurance, small vehicles, and appliances should improve disposable income and spur urban-plus-rural consumption through FY 2025-26, supporting India’s pivot to consumer-led growth.