Chandigarh/New Delhi, September 4:The GST Council on Wednesday cleared the most sweeping overhaul of India’s indirect tax regime since its introduction, approving a two-slab structure and major rate cuts on a host of essential goods and services. The new rates will take effect from September 22, the first day of Navaratri.
Under the revised structure, the existing four tax slabs of 5, 12, 18 and 28 percent have been collapsed into just two categories — 5 percent and 18 percent. In addition, health and life insurance have been fully exempted from GST, while a list of daily-use goods and personal care items have been moved into the lower bracket.
Finance ministry officials said the overhaul is designed to boost consumer demand, bring relief to middle-class households and encourage economic growth. “The new structure simplifies compliance and ensures that the benefits are passed on to ordinary citizens,” a senior official said.
What Gets Cheaper
Several essential food items are now tax-free, including plain chapati, roti, parathas (earlier 18 percent), UHT milk, paneer and chena. Butter, ghee, cheese, condensed milk, dry fruits, jams, jellies, cereals, pastries, biscuits, namkeens, tender coconut water and fruit juices will attract only 5 percent GST, down from 12–18 percent.
Personal care products such as shampoo, hair oil, toothpaste, soaps, shaving cream and talcum powder will also fall under the 5 percent bracket, reduced from 18 percent. Household products like feeding bottles, kitchenware, bicycles, combs, umbrellas and bamboo furniture have been lowered to 5 percent as well.
Healthcare and education will see a significant cut. Insurance premiums for life and health policies, previously taxed at 18 percent, are now fully exempt, as are 33 life-saving and cancer drugs. Items like spectacles, diagnostic kits, thermometers and medical-grade oxygen will draw 5 percent GST. Exercise books, notebooks, sharpeners, erasers, crayons and maps are exempt.
Construction and housing inputs such as cement will be taxed at 18 percent, down from 28 percent. In the automobile sector, small petrol and diesel cars, motorcycles up to 350 cc, buses, trucks, ambulances and three-wheelers will all see their GST rate slashed from 28 to 18 percent. Consumer durables — refrigerators, ACs, washing machines, dishwashers, TVs, monitors and projectors — have also been moved to 18 percent.
The textile and handicraft sector will benefit from reduced rates too, with man-made fibre, yarn, footwear under Rs 2,500, leather goods and handicrafts all taxed at 5 percent instead of 12. For farmers, inputs such as tractors, tyres, irrigation equipment and farming tools will now draw 5 percent instead of 12–18 percent.
What Gets Costlier
The changes, however, will raise levies on luxury and sin goods. Tobacco products, including gutkha, pan masala, bidis, cigarettes and zarda, will eventually attract 40 percent GST, although they will remain at 28 percent plus cess until repayment of COVID compensation loans, expected by the end of 2025.
Sugary and aerated beverages have been moved up to 40 percent from 28 percent. Luxury cars, high-end motorcycles above 350 cc, yachts, racing cars and personal-use aircraft will also draw 40 percent GST under the new regime.
Leisure services face the steepest hike, with casinos, lotteries, horse racing and online gaming all taxed at 40 percent.
The council said the shift to two slabs marks a “next-generation GST reform” that aims at simplicity and transparency. “This is a milestone in India’s indirect tax journey,” officials noted.
