The Goods and Services Tax (GST) Council, in its 56th meeting, approved a major restructuring of the tax system by reducing it to primarily two slabs—5% and 18%. Union Finance Minister Nirmala Sitharaman announced that the new structure will come into effect from September 22 for most products, while tobacco-related goods will shift later.
Apart from the two main slabs, a special 40% rate will apply to “sin goods” and luxury items, including tobacco, aerated drinks, large cars, helicopters, yachts, and private-use airplanes.
Cheaper Household and Daily-Use Items
Several commonly used items such as soaps, shampoos, toothpaste, toothbrushes, hair oil, bicycles, tableware, and kitchenware will now attract just 5% GST instead of 12% or 18%. Everyday food products like namkeens, sauces, pasta, chocolates, coffee, butter, and instant noodles will also move to the 5% slab. Cement will see its GST rate reduced from 28% to 18%.
Essential food items such as milk, paneer, chapatis, parathas, and rotis will be exempted completely, moving to the 0% slab. Additionally, 33 lifesaving drugs, vision-correcting spectacles, and individual health and life insurance policies will also fall under the 0% rate.
Relief for Appliances and Vehicles
Consumer durables such as air conditioners, televisions, dishwashers, and motorcycles up to 350cc will see their tax rate fall from 28% to 18%. Trucks, buses, ambulances, and all auto parts will also be taxed at 18%. Industry watchers expect these changes to bring down costs for consumers and increase demand in the upcoming festive season.
Support for Key Sectors
The Council has also addressed the long-pending inverted duty structure. GST on manmade fibre has been reduced from 18% to 5%, and manmade yarn from 12% to 5%, benefiting the textile sector. Similarly, fertilizers and raw materials such as sulphuric acid, nitric acid, and ammonia will now attract 5% GST instead of 18%.
According to the Finance Minister, these reforms were carried out with a focus on the common man, supporting labour-intensive industries, farmers, and healthcare. The changes are expected to simplify taxation, improve compliance, and make essential goods more affordable.
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