India: Recommendations of GST Council meeting

The 56^th Goods and Services Tax (GST) Council meeting held on September 3, 2025, launched “Next-Generation GST Reform,” the most important features of which are:

• The rationalization of the current four-tiered goods and services (GST) rate structure into a two-rate structure with a standard rate of 18% and a merit rate of 5%. The proposal includes also a special de-merit rate of 40% for a select few goods and services as well as the rate reduction for several goods. Rate changes would be effective September 22, 2025, except for select goods.
• The proposed amendment to the sourcing rules for intermediary services to be recipient’s location, enabling export benefits. This will impact sales and marketing services, which are considered intermediary services that are currently sourced where the service provider is located. Therefore, cross-border sales and marketing support activities currently taxed at 18% GST would effectively become zero-rated, thus eliminating the GST burden on the foreign recipient while retaining the GST recovery right of the Indian service provider. This proposed change would be effective on the date yet to be notified.

Read a September 2025 report prepared by the KPMG member firm in India