The 56th GST Council Meeting, scheduled for 3rd and 4th September 2025 in New Delhi, is set to be one of the most crucial sessions since the implementation of GST in 2017. With Prime Minister Narendra Modi announcing “Next-Generation GST Reforms” on the 79th Independence Day (15th August 2025), all eyes are now on the Council to roll out a more simplified and growth-oriented GST framework.

Expectations from the 56th GST Council Meeting: GST 2.0 on the Horizon?

1. GST Rate Rationalisation – Towards a 2-Slab System

One of the biggest reforms under discussion is the restructuring of GST rate slabs. Currently, GST operates under a four-tier system (5%, 12%, 18%, 28%), along with a special 40% rate for sin goods.

The proposal under review:

• Merging slabs into two primary rates: 5% & 18%
• 40% rate to remain for sin goods & ultra-luxury items

Likely changes in this rationalisation:

• Goods currently taxed at 12% may be reduced to 5%, covering essentials such as toothpaste, butter, cheese, namkeen, personal care items, and textiles.
• Items under the 28% slab may reduce to 18% – including electronics, appliances, and small cars.
• Insurance premiums (currently at 18%) may drop to 5% or even become exempt.

This rationalisation could ease inflationary pressure, boost consumer demand, and spur economic growth, while simplifying compliance for businesses.

2. Addressing Inverted Duty Structures

Several industries, including textiles, footwear, fertilisers, paper, and packaging, continue to face an inverted duty structure – where input taxes are higher than output taxes, leading to blocked Input Tax Credit (ITC) and working capital crunches.

The GST Council is expected to:

• Propose a phased correction of these anomalies.
• Provide industries adequate time to adjust to new rates.
• Ensure measures to prevent anti-profiteering disputes during implementation.

3. Review of Compensation Cess

The GST compensation cess – a key revenue-sharing mechanism for states – was extended until 31st March 2026. At this meeting, discussions are likely to revolve around:

• Whether to replace it with a new levy, such as a Health and Clean Energy Cess post-2026.
• How to balance state revenues once cess collections phase out.

4. GST on Insurance, Drones & Emerging Sectors

Several sector-specific GST issues may see clarity:

• Insurance: The Council is expected to deliberate on reducing or exempting GST on health and life insurance premiums (currently taxed at 18%), a move that could significantly benefit households.
• Drones: A uniform 5% GST rate for commercial drones is being considered, replacing the fragmented tax structure (5% for business drones, 18% for camera drones, 28% for personal-use drones). This could accelerate drone adoption across agriculture, logistics, and infrastructure sectors.
• Virtual Digital Assets & E-commerce: Clarifications may be issued on taxation of digital assets, real estate, and gaming.

5. Pre-Filled Returns & Automated Refunds

The Council may also deliberate on pre-filled GST returns and automated refund processes as part of GST 2.0 reforms. These measures aim to:

• Reduce manual errors in return filing.
• Ensure faster credit of refunds to taxpayers.
• Strengthen compliance with minimal intervention.

Why the 56th GST Council Meeting Matters

This meeting isn’t just another policy review. It is expected to be the launchpad for GST 2.0. The expected outcomes could:

• Simplify India’s GST regime by reducing slabs.
• Encourage consumption by lowering taxes on essentials and consumer goods.
• Support businesses through the rationalisation of inverted duty structures.
• Balance state and Centre revenues with a cess roadmap.
• Lay the foundation for a more automated, transparent GST compliance ecosystem.

With inflation control, consumer relief, and ease of doing business at stake, the Council’s decisions will directly impact households, industries, and state finances alike.