JSA Prism | Indirect Tax | 56th GST Council Meeting

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Key highlights of the 56^th Goods and Services Tax Council meeting

Based on the recommendations of the Prime Minister Shri Narendra Modi during his independence day address to the nation, the GST[1] Council, in its 56^th meeting, has recommended various changes focusing on rate rationalisation, correction of inverted duty structure, resolving classification issues, measures for facilitation of trade and streamlining GST compliances.

Key changes proposed to the GST laws

1. Operationalisation of GSTAT[2]: It is recommended that GSTAT will be operational for accepting appeals before end of September 2025 and will commence hearing appeals before end of December 2025. It is also recommended that such prior period appeals should be filed by June 30, 2026.The Principal Bench of GSTAT will also serve as National Appellate Authority for Advance Ruling. This will ensure consistency in advance rulings and offer greater certainty to taxpayers.
2. Amendment in place of supply provisions for intermediary services: The GST Council has recommended omission of clause (b) of Section 13(8) of the IGST Act[3], which prescribes the place of supply of intermediary services to be the location of the supplier of services. As per this recommendation, the place of supply of intermediary services will be the default rule i.e., place of supply will be the location of the service recipient (Section 13(2) of the IGST Act). This amendment aims to restore the export status for intermediary services when supplied to recipients located outside India, thereby facilitating the benefit of export to the Indian service providers.
3. Amendments in relation to post-sale discounts: Recommendation to omit Section 15(3)(b)(i) of the CGST Act[4], which provides the requirement to establish discount in terms of an agreement entered into before or at the time of such supply and specifically linking of the same with relevant invoices. The recommendation will grant discount basis a credit note issued under Section 34 of the CGST Act.The Government will issue circular clarifying various issues, such as:
   • non-reversal of ITC[5] on account of post-sale discount through financial/commercial credit note;
   • treatment of the post-sale discount provided by manufacturer to the dealer as additional consideration, in the transaction between dealer and end-customer; and
   • treatment of post-sale discount as consideration in lieu of promotional activities etc. performed by the dealer.
4. Recommendations with respect to inverted duty structure: The proposed 2 (two) tier rate structure is likely to reduce the disparity between the rates applicable for outward and inward supplies for specific sectors (such as man-made textiles). This will help mitigate the issue of IDS[6] arising on account of unutilised ITC, thereby reducing dependence on refund claims (refer tariff recommendations below).The GST Council recommended amending Section 54(6) of the CGST Act, to provide for sanction of 90% of refund claimed on provisional basis, in cases arising out of IDS, on similar lines as is presently available for refund in respect of zero-rated supply. This will be operationalised from November 1, 2025.
5. Risk-based provisional sanction of refunds for zero rated supply: Recommendation to amend Rule 91(2) of the CGST Rules[7], to provide for sanction of 90% provisional refund based on identification and evaluation of risk by the system (except in situations where proper officer provides reasons in writing to initiate detailed scrutiny of refund claim). A separate notification should be issued for notifying certain category of registered persons who may not be granted refund on provisional basis. This provision will be operationalised from November 1, 2025.
6. Supply of local delivery services through ECO[8]: Local delivery services through an ECO to be notified under Section 9(5) of the CGST Act (for cases where the person supplying such services is not liable for registration under GST). The applicable rate of GST for such services will be 18%.
7. Introduction of simplified registration scheme for small suppliers supplying through ECOs: Concept of simplified GST registration mechanism proposed for small suppliers making supplies through ECOs across multiple States facing challenges in maintaining principal place of business in each State. Detailed modalities of the scheme to be placed before the GST Council.
8. Rate rationalisation: The GST Council has recommended a 2 (two) tier rate structure i.e., 5% and 18%, with specific rate of 40% for demerit/luxury goods. The key changes are as below:
   • exemption from GST on all individual life and health insurance policies (whether term life, ULIP or endowment policies, family floater policies and policies for senior citizens and reinsurance thereof);
   • reduction of GST from 18% or 12% to 5% for items such as, hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware and other household articles;
   • reduction of GST from 12% or 18% to 5% on food items such as packaged namkeens, bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter and ghee;
   • reduction of GST from 28% to 18% on air-conditioning machines, television sets, small cars, motorcycles equal to or less than 350 CC; and
   • uniform rate of 18% on all auto parts irrespective of their HS code.

The key rate changes are outlined in the tables below:

Key tariff changes proposed for supply of services (effective September 22, 2025)

Key tariff changes proposed for supply of goods (effective September 22, 2025)

This Prism is prepared by:

Manish Mishra Partner & Head of Practice – Indirect Tax	Shareen Gupta Partner	Shikha Parmar Principal Associate
Ruchita Modi Principal Associate	Tanay Vyas  Senior Associate	Dhwani Vyas  Associate