The 56th meeting of the GST Council (3rd September 2025, New Delhi) brought news that instantly caught the attention of households, kirana stores, and food processors across India. A wide basket of daily essentials—including milk, paneer, cheese, butter, fruits, nuts, and even packed drinking water—saw their GST rates slashed to either Nil or 5% .
For the common consumer, this feels like a sigh of relief against rising grocery bills. For businesses, especially MSMEs in the food sector, it offers smoother compliance and reduced working-capital strain. But what exactly has changed, when do the new rates apply, and how should taxpayers prepare? Let’s dive in.
What Changed? Key Items Made Cheaper
The Council recommended major rate cuts across several categories of essentials. A snapshot:
- Milk & Dairy:
- UHT milk – reduced from 5% → Nil
- Paneer (pre-packaged and labelled) – 5% → Nil
- Cheese – 12% → 5%
- Butter, ghee, butter oil, dairy spreads – 12% → 5%
- Fruits & Nuts:
- Brazil nuts, almonds, pistachios, chestnuts, pine nuts, hazelnuts – 12% → 5%
- Dried dates, figs, mangoes, guavas, citrus fruits – 12% → 5%
- Other Essentials:
- Packed drinking water in 20-litre bottles – 12% → 5%
- Malt, starches, vegetable extracts – 12–18% → 5%
- Everyday groceries like sugar, confectionery, cocoa, biscuits, sauces, namkeens – 12–18% → 5%
This is one of the most sweeping reductions in the food and FMCG basket since the rollout of GST in July 2017.
When Will the New Rates Apply?
The GST Council clarified that:
- Services rate changes → effective 22nd September 2025
- Goods rate changes (except tobacco, pan masala, gutkha, etc.) → effective 22nd September 2025
- Tobacco & related sin goods → to continue at existing rates until compensation-cess obligations are fully discharged; revised date to be separately notified .
👉 That means, for most essentials, consumers will start seeing revised MRPs and invoices from late September 2025 onwards.
Why It Matters
1. Relief for Households
With milk, paneer, cheese, butter, and nuts forming part of daily diets, the impact on monthly grocery bills could be substantial.
2. Support for MSMEs & Retail Chains
Kirana stores and retailers will have simpler billing structures. FMCG distributors handling biscuits, namkeens, sauces, or confectionery will see reduced tax burdens.
3. Inflation Cooling
Food inflation has been a persistent policy headache. Rate cuts directly cool CPI in the food basket and encourage wider consumption.
4. Hospitality & HORECA Benefits
Restaurants, hotels, and caterers sourcing bulk butter, cheese, and sauces will also benefit from lower input costs.
Compliance To-Dos for Businesses
Businesses must proactively prepare to avoid transitional mismatches:
- Update HSN-wise rate masters in ERP/POS systems by 22 Sept 2025.
- Revise price lists/catalogues and communicate to distributors/retailers.
- Re-evaluate stock under Section 14 CGST Act (change in rate of tax on supply) and apply transitional rules under Rule 24 if needed.
- Check ITC eligibility – rate cut doesn’t alter Section 16 ITC conditions, but classification errors can cause denial.
- Reprint labels for MRP-based products (like packaged paneer, butter, juices) where prices include GST.
Real-Life Examples
- Household level: A family buying 5 packets of paneer weekly (₹80 each) earlier paid ₹84 (with 5% GST). Post-cut, the same packet will cost ₹80 flat. That’s nearly ₹1,000 in annual savings for paneer alone.
- MSME trader: A dry fruits trader dealing in almonds worth ₹50 lakh annually saves around ₹3.5 lakh in tax output liability—improving cash flow.
- Restaurant: A cloud kitchen sourcing butter, cheese, sauces worth ₹5 lakh a year saves ~₹35,000 in tax outflow.
FAQs
Q1: Is the change automatic?
No. It applies only from 22nd September 2025, once notifications are issued by CBIC under Section 9 CGST Act .
Q2: Do I need to reverse ITC on stock purchased at higher rate?
Not just because of the rate cut. ITC reversal applies only where barred under Section 17 or transitional rules.
Q3: Will MRPs automatically drop?
Yes, for products under Legal Metrology (Packaged Commodities) Rules. Manufacturers must re-sticker/re-print MRPs to reflect reduced tax.
Legal Backdrop & Notifications
- Section 9, CGST Act, 2017 – empowers levy & collection of GST.
- Section 14, CGST Act – transitional provisions for change in rate of tax.
- Section 16 – ITC eligibility remains unaffected.
- Notifications under Section 11 (exemption) and Section 6 IGST Act will operationalize these reductions.
- As of now, changes are recommendations; CBIC will notify soon .
Checklist for Taxpayers
✅ Update ERP/Accounting software with new HSN rates.
✅ Communicate with suppliers/distributors on transitional pricing.
✅ Re-evaluate contracts where tax-inclusive pricing is agreed.
✅ Monitor CBIC notifications closely (expected mid-Sept 2025).
✅ Ensure GST returns (GSTR-1, 3B) reflect correct tax slabs from 22 Sept onwards.
Conclusion
The GST Council’s 56th meeting delivered a direct consumer-friendly reform—making essentials cheaper, easing inflationary pressure, and simplifying life for businesses. But as always in tax, the devil lies in the compliance. Traders, retailers, FMCG distributors, and restaurateurs must carefully update systems, contracts, and stock records to stay compliant while passing on benefits to customers.
This round of GST rate cuts signals a pro-middle class, pro-MSME approach, reaffirming GST’s role not just as a revenue tool, but as a lever for affordability and growth.
Businesses should prepare for 22 Sept 2025 by updating systems and watching out for CBIC notifications. Consumers can expect their grocery bills to shrink—finally some good news at checkout!
