GST Council Rationalises Rates: Major Relief for Farmers and Common Man

GST Council approves rate rationalisation with a focus on the common man, labour-intensive industries, farmers and key drivers of the economy.

Ajeet Singh

Published: Sep 4, 2025 - 02:16 Updated: Sep 4, 2025 - 08:36

GST Council Rationalises Rates: Major Relief for Farmers and Common Man

The 56th meeting of the Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, has approved sweeping reforms to rationalise GST rates, offering significant relief to the common man, farmers, small businesses, and households.

The Council has streamlined the current four-tier tax structure into a two-rate system — a Standard Rate of 18% and a Merit Rate of 5%. A special de-merit rate of 40% will apply to selected luxury and sin goods.

The rationalisation focuses on the common man, labour-intensive industries, agriculture, health, and key drivers of the economy. GST rates on many essential farm items, including tractors and machinery, have been reduced, providing direct relief to farmers and the agriculture sector. The revised rates will come into effect from September 22, 2025.

The reforms follow Prime Minister Narendra Modi’s Independence Day announcement of citizen-friendly GST measures and aim to simplify taxation, reduce the burden on households, and promote ease of doing business.

Agriculture and Allied Sectors

Farm Mechanisation

GST on tractors (<1800 cc) reduced to 5%
Tractor components such as tyres, tubes, and hydraulic pumps brought down from 18% to 5%
Sprinklers, drip irrigation systems, and harvesting machinery: 12% → 5%
Fixed-speed diesel engines (≤15 HP), threshing machinery, and composting machines: 12% → 5%
All agricultural, horticultural, or forestry machinery for soil preparation, harvesting, threshing, baling, mowing, or composting: 12% → 5%

Fertiliser Inputs

Ammonia, sulphuric acid, nitric acid: 18% → 5%

Bio-Pesticides & Micronutrients

Bio-pesticides and several micronutrients: 12% → 5%
Micronutrients listed under the Fertiliser Control Order, 1985, revised to 5% from 12%

Fruits, Vegetables & Food Processing

Prepared/preserved vegetables, fruits, and nuts: 12% → 5%

Dairy Sector

No GST on milk and paneer
Butter, ghee, and cheese: 12% → 5%
Milk cans (iron, steel, aluminium): 12% → 5%

Aquaculture

Prepared or preserved fish: 12% → 5%

Textiles

Correction of inverted duty structure: manmade fibre reduced from 18% to 5%, and manmade yarn from 12% to 5%

Solar Power & Renewable Energy

Solar-powered devices and renewable energy parts: 12% → 5%

Relief for Households

Household items such as hair oil, soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware: 18%/12% → 5%
Ultra-High Temperature (UHT) milk, packaged paneer, and all Indian breads (chapati, paratha, parotta, etc.): 5% → NIL
Packaged namkeens, bhujia, sauces, pasta, noodles, chocolates, coffee, preserved meat, cornflakes, butter, ghee: 18%/12% → 5%
Beauty and wellness services (gyms, salons, barbers, yoga centres): 18% → 5%
Children’s bottles, napkins, diapers, sewing machines, maps, notebooks, and stationery: NIL or minimal GST

Healthcare Sector

Exemption of GST on all individual life and health insurance policies (including ULIPs, family floaters, and senior citizen plans) and reinsurance
33 lifesaving drugs: 12% → NIL; 3 lifesaving drugs: 5% → NIL
All other medicines: 12% → 5%
Medical apparatus and devices (surgical, dental, veterinary, analytical): 18% → 5%