At its 56th meeting, the GST Council, led by Finance Minister Nirmala Sitharaman, approved a significant overhaul of the GST rate structure. The decision, which will take effect on September 22, the start of Navaratri, involves the elimination of the 12pc and 28pc tax slabs.
The Council has adopted a new two-tier structure, consisting of 5pc and 18pc rates. An additional 40pc slab has been created for certain "sin" and luxury goods, although some items, like tobacco products and cigarettes, will remain at 28pc GST plus a compensation cess until related loans are paid off.
Minister Sitharaman stated that these reforms were made with a focus on the common person. She emphasised that rates on many daily-use items have been drastically reduced after a thorough review. She added that the changes would benefit labour-intensive industries, farmers, the agriculture sector, and the health sector, while also supporting key drivers of the economy.
Key Rate Changes
- 5pc Slab: Over 175 consumer items will now be taxed at 5pc. This includes household goods like hair oil, soaps, shampoos, toothbrushes, and kitchenware.
- 18pc Slab: Approximately 90pc of goods previously taxed at 28pc will now fall under the 18pc slab. This category includes air conditioners, televisions of all sizes, dishwashers, and cement.
- Exemptions (Nil Tax): Some items will become even cheaper, moving from the 5pc slab to a nil tax rate. This includes UHT milk, paneer, chhena, and all types of Indian bread. Spectacles will now be taxed at 5pc. The Council also moved 33 life-saving drugs from the 12pc slab to a nil tax rate.
- New 40pc Slab: A new 40pc GST rate has been approved for "sin" and "super luxury" goods. This includes items like pan masala, aerated and caffeinated beverages, motorcycles exceeding 350 cc, yachts, and helicopters. A key change for these products is that GST will now be levied on the retail sale price (RSP) instead of the wholesale value.
- Industry-Specific Changes: The inverted duty structure has been corrected for man-made fibers and yarns, with rates reduced from 18pc and 12pc respectively, to 5pc. In the automotive sector, small cars up to 350 cc, buses, trucks, ambulances, and auto parts will all move to the 18pc slab.
Also Read: GST Council meet Day 1: New tax likely to be levied from Sept 22
Finance Minister Sitharaman highlighted that the reforms were designed to provide relief to the middle class and boost economic growth.
Prime Minister Narendra Modi welcomed the Council’s decision, recalling his recent promise of next-generation GST reforms. In a post on X, he noted that the Union Government had submitted a detailed proposal for these changes, aimed at easing life for the common person and strengthening the economy.
He expressed his satisfaction that the GST Council, which includes both Union and State representatives, collectively agreed to the proposals, which he believes will benefit citizens, farmers, MSMEs, and small businesses.
Also Read: GST Council backs dual slab system of 5% and 18%: Sources
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