India’s Next‑Generation GST Reforms – 

Official Press Release Insights and Investment Implications

Published: 3 September 2025
Author: Piyush Patel

Introduction

The Goods & Services Tax (GST) Council’s 56th meeting on 3 September 2025 delivered the most sweeping restructuring of the indirect tax regime since GST’s launch in 2017. A detailed press release issued at 8 p.m. on the same day lays out HSN‑wise and sector‑wise rate changes across hundreds of goods and services. The reforms simplify compliance, provide targeted relief to consumers and businesses, and introduce a high sin‑goods rate to curb consumption of harmful products.

The Council recommended implementing the new rates from 22 September 2025 for most goods and services. Pan masala, gutkha, cigarettes, chewing tobacco, unmanufactured tobacco and bidi will continue at existing rates until liabilities under the compensation‑cess account are settled. The press release also mandates that 90 % of refund claims arising from inverted duty structures be provisionally sanctioned based on risk analysis.

This blog distils the voluminous annexures into investor‑friendly themes, highlighting key rate changes, sectoral winners and losers, and what the reforms mean for listed companies.

Major GST Rate Changes on Goods

The press release lists over 100 HSN codes with rate alterations. To aid investors, the changes can be grouped into broad categories:

Category	Examples	Old GST rate	New GST rate	Key evidence
Food & beverages (processed foods, condiments, snacks and packaged drinks)	Ultra‑high temperature (UHT) milk, condensed milk, butter, cheese, paneer, dried nuts (almonds, pistachios, etc.), dried fruits, malt, vegetable extracts, vegetable proteins (soya bari), namkeens and bhujia, drinking water in 20‑litre bottles, plant‑based milk and fruit juice drinks	12 – 18 %	5 %	Annexure I lists dairy items, nuts, fruits, malt, vegetable extracts and namkeens shifting from 12 %/18 % to 5 %. Plant‑based and fruit‑juice drinks drop from 12 %/18 % to 5 %.
Fats & oils	Animal and microbial fats (pig lard, beef tallow, poultry fat, fish oils), edible mixtures, glycerol and beeswax	12 – 18 %	5 %	The press release shows multiple animal fats and oils shifting from 12 %/18 % to 5 %.
Sugar, confectionery & chocolate	Refined sugar with flavouring, other sugars (lactose, maltose, glucose, fructose), sugar syrups, sugar boiled confectionery, chocolate and cocoa products	12 %	5 %	Annexure I lists sugar and confectionery items moving from 12 % to 5 %.
Chemical & industrial inputs	Medical grade oxygen, sulphuric and nitric acids, iodine and other chemicals, micronutrients and gibberellic acid	12 – 18 %	5 %	Many industrial chemicals and micronutrients drop from 12 %/18 % to 5 %.
Construction materials & handicrafts	Portland cement and other hydraulic cements, marble, granite, sand‑lime bricks, statues, handcrafted candles, carved wood products, wooden frames and decorative art	Cement: 28 %, handicrafts: 12 %	18 % for cement; 5 % for many handicrafts	Cement moves from 28 % to 18 %; numerous handicraft items shift from 12 % to 5 %.
Coal, lignite & peat	Coal, briquettes, lignite, peat	5 %	18 %	Annexure I shows coal, lignite and peat rates rising from 5 % to 18 %.
Sin goods (pan masala, tobacco & sugar‑sweetened beverages)	Pan masala, aerated waters with added sugar, carbonated fruit drinks, caffeinated beverages, cigarettes and other tobacco products	28 %	40 %	Pan masala and sweetened/caffeinated beverages move from 28 % to 40 %. Tobacco items shift from 28 % to 40 %, except bidis which drop to 18 %.
Cemented goods lowered to 18 %	Portland cement and other hydraulic cements	28 %	18 %	Cement products fall from 28 % to 18 %.

Key GST Changes on Services

The Council also rationalised GST rates on several service categories:

Service category	Examples	Old rate	New rate	Evidence
Life & health insurance	Individual life and health insurance policies (including reinsurance)	18 % with ITC	Exempt (0 %)	Annexure IV exempts all individual health and life insurance, which should lower premium costs and encourage insurance penetration.
Beauty & wellness services	Beauty salons, spa and physical well‑being services under SAC 99972	18 % with ITC	5 % without ITC	The press release reduces GST on beauty services from 18 % to 5 % (no ITC).
Medical & environmental services	Treatment of effluents by common effluent treatment plants; treatment/disposal of biomedical waste	12 % with ITC	5 % with ITC	Environmental and biomedical waste management services now attract 5 % GST.
Entertainment & sin services	Admission to casinos, race clubs and sporting events (e.g., IPL); licensing of bookmakers; specified actionable claims (betting, gambling, online gaming)	28 %	40 %	Sin‑service categories face a hefty 40 % GST. Cinematograph film tickets priced ≤₹100 fall from 12 % to 5 %.
Hotel accommodation (budget)	Hotel accommodation valued at ≤₹7,500 per day	12 % with ITC	5 % without ITC (not shown explicitly, but included in Annexure IV)	Budget hotel stays become cheaper due to lower GST.
Works contract & oil/gas services	Offshore works contract for oil & gas exploration, works contract with >75 % earthwork provided to government, subcontracted works	12 % with ITC	18 % with ITC	Annexure IV notes that composite supply of works contract relating to offshore oil & gas and government earthwork moves from 12 % to 18 % with ITC.
Transportation services (select categories)	Air travel (non‑economy class), certain passenger transport, rail container transport, pipeline transport of natural gas/petroleum, renting of goods carriage and multimodal transport	Varies (5 % or 12 % with ITC)	Multiple changes – air travel (non‑economy) 12 %→18 %; goods transport by rail (containers) 12 %→5 % (no ITC) or 18 % with ITC; pipeline transport 5 %→5 % (unchanged) or 12 %→18 %	The press release details several rate adjustments for passenger and goods transport. Investors in transport/logistics should examine the specific impacts.
Job work services	Job work in relation to umbrellas, printing of goods under Chapters 48/49	12 % with ITC	5 % with ITC	Job work services for umbrellas and printing now attract 5 % GST.

Process & Legal Reforms

Beyond rate changes, Annexure V recommends a series of process reforms to improve compliance and ease of doing business:

• Risk‑based provisional refunds: The Council endorsed sanctioning 90 % of refund claims related to zero‑rated supplies and inverted duty structures based on system‑generated risk evaluation. This will improve working‑capital flow for exporters and businesses facing inverted duty situations.
  
  

• Simplified GST registration: A proposed optional simplified registration scheme grants automatic registration within three working days to low‑risk applicants whose expected output tax liability on supplies to registered persons does not exceed ₹2.5 lakh per month. This scheme, expected to benefit 96 % of new applicants, will be operational from 1 November 2025.
  
  

• Simplified registration for small e‑commerce suppliers: The Council approved, in principle, a simplified mechanism allowing small suppliers on e‑commerce platforms to register without maintaining a principal place of business in each state, easing compliance for cross‑state sellers.
  
  

• Place of supply for intermediary services: Clause 13(8)(b) of the IGST Act is proposed to be omitted, aligning place of supply for intermediary services with the location of the recipient. This would classify such services as exports, enabling exporters to claim benefits.
  
  

• Post‑sale discount clarifications: Sections 15 and 34 of the CGST Act will be amended to simplify treatment of post‑sale discounts. Clarification will also be issued on non‑reversal of input tax credit when discounts are provided via financial/commercial credit notes.
  
  

• Retail sale price valuation for pan masala and tobacco: GST will be levied on the retail sale price rather than transaction value for pan masala, gutkha and tobacco products, ensuring better valuation and tax capture.
  
  

• GSTAT operationalisation: The Goods and Services Tax Appellate Tribunal (GSTAT) will become operational by end‑September 2025, with hearings beginning before the end of December. The principal bench will also act as the National Appellate Authority for advance rulings.
  
  

Visualising the New Rate Landscape

The following chart compares approximate average GST rates before and after the reforms across representative categories of goods and services. It highlights rate cuts (e.g., food, fats & oils), exemptions (insurance services) and increases (coal & lignite, sin goods, works contracts).

Sectoral Impact & Investment Outlook

Sectors Likely to Benefit

Sector	Potential winners	Rationale
Food & FMCG	Hindustan Unilever, Nestlé India, Dabur, Marico, Britannia, ITC (FMCG), Bikaji Foods, Tata Consumer	A broad swath of processed foods, dairy products, nuts, snacks, malt, vegetable extracts and juices moves from 12 %/18 % to 5 %. Lower taxes can spur consumption and boost volumes.
Edible oils & fats	Adani Wilmar, Patanjali, Avanti Feeds	Animal and plant fats, oils and edible mixtures drop to 5 %, potentially improving margins and demand.
Pharmaceuticals & healthcare	Sun Pharma, Cipla, Dr Reddy’s, Biocon, Divislab	Rates on medical grade oxygen, certain acids and pharmaceutical inputs are reduced to 5 %, lowering input costs. Individual health insurance is exempt, making healthcare more affordable and increasing insurance penetration.
Environment services	EMS Ltd, VA Tech Wabag, Ramky Enviro	Treatment of effluents and biomedical waste now attracts 5 % GST, reducing service costs and promoting environmental compliance.
Hospitality & leisure	Indian Hotels, ITC Hotels, Chalet Hotels, PVR INOX,	Budget hotel stays (≤₹7,500) and cinema tickets ≤₹100 drop to 5 %, supporting demand for hotels and entertainment.
Beauty & wellness	Nykaa, Kaya Clinics, unlisted spa chains	Beauty and wellness services shift from 18 % to 5 % (without ITC), making salon and spa services more affordable.
Handicrafts & artisans	Khadi cooperatives, Craftsvilla, Tiny manufacturer‑exporters	Handicraft products such as idols, statues, carved wood items and handmade candles drop from 12 % to 5 %. This encourages organised manufacturing and supports rural artisans.

Sectors Facing Headwinds

Sector	Potential losers	Rationale
Sin goods (tobacco, pan masala, sugary drinks and caffeinated beverages)	ITC (cigarettes), Godfrey Phillips India, VST Industries, Varun Beverages (Pepsi bottler), Red Bull India	A 40 % GST rate will apply to pan masala, sugar‑sweetened beverages, caffeinated drinks and most tobacco products. This sharp increase is likely to dent volumes and margins.
Coal mining & thermal power	Coal India, NLC India, power producers dependent on coal	The GST rate on coal, lignite and peat rises from 5 % to 18 %, pushing up input costs for power and steel producers and dampening profitability.
Works contract & oil/gas services	Larsen & Toubro (L&T), Oil India, ONGC contractors	Composite supplies of works contract relating to offshore oil & gas exploration and government earthwork shift from 12 % to 18 %, raising costs for exploration projects.
Casinos, gaming & betting	Delta Corp, online gaming platforms	Admission to casinos, racing clubs and sporting events, licensing of bookmakers and specified actionable claims now attract 40 % GST, significantly increasing tax outgo and potentially reducing patronage.
Passenger transport & aviation (premium classes)	InterGlobe Aviation (Indigo), SpiceJet, Vistara	Non‑economy air travel and some passenger transport services moved from 12 % to 18 %. Higher GST may be passed on to consumers, potentially dampening demand.

Positive Outcomes

1. Broader consumption stimulus: Substantial rate cuts on food, FMCG, fats, oils, chemicals and handicrafts will lower prices and enhance affordability, especially for the middle class and rural consumers.
   
   

2. Push for environmental and health services: Reduced GST on effluent and biomedical waste treatment encourages compliance and investment in environmental infrastructure. Exemption for life and health insurance will help deepen insurance penetration and healthcare access.
   
   

3. Support for MSMEs and artisans: Simplified registration, provisional refunds and lower rates for handicrafts and small suppliers will foster the formalisation and growth of MSMEs.
   
   

4. Tax clarity and institutional strengthening: The operationalisation of GSTAT and clarifications on post‑sale discounts provide greater legal certainty and trust in the GST regime.
   
   

Potential Risks & Considerations

1. Fiscal impact and compensation cess: Large rate cuts could strain tax revenues in the short term. Sin‑goods increases may not fully offset losses, and compensation cess obligations must be settled before pan masala and tobacco rates are lowered.
   
   

2. Inflationary pressure in energy and sin segments: Higher GST on coal and lignite could raise energy costs, impacting power tariffs and downstream industries. Consumers of pan masala, sugary drinks and tobacco will bear higher costs, potentially fuelling inflation in discretionary categories.
   
   

3. Implementation complexity: Businesses must update pricing, IT systems and accounting to reflect the new rates. The phased implementation (22 September 2025) and exceptions for sin goods add complexity.
   
   

4. Sector‑specific demand elasticity: Some rate increases (works contract, aviation, casinos) may significantly curb demand, affecting volumes and profitability.
   
   

Conclusion

The official press release on next‑generation GST reforms reveals a comprehensive overhaul of India’s indirect tax landscape. The shift to lower rates for a wide range of food items, edible oils, chemicals, handicrafts, environmental services and certain transport services will likely spur consumption and investment. Meanwhile, sharp hikes on sin goods, coal and high‑value services signal the government’s intent to promote healthier lifestyles and raise revenue from non‑essential activities.

For investors, the reforms create clear tailwinds for FMCG, edible oils, pharmaceuticals, environment services, hospitality, beauty & wellness and handicrafts, while posing headwinds for sin‑goods producers, coal miners, premium transport providers and gaming companies. Thorough due diligence on company fundamentals, demand elasticity and regulatory compliance remains crucial. Overall, the GST overhaul underlines the government’s commitment to simplifying taxes and stimulating growth, presenting opportunities for well‑positioned companies and informed investors.

Disclaimer

This article is meant for educational purposes only and does not constitute financial advice.