The new Goods and Services Tax (GST) is most likely to become effective from September 22, and will result in slashing of rates of hundreds of items – from butter, soap, and shampoo to small cars and electronics, the Finance Minister, Nirmala Sitharaman, said while addressing a press conference late Wednesday.
The 56th GST Council meeting, chaired by Sitharaman, took place on September 3 and will continue on September 4 before the final verdict on the reformed GST structure is out.
The Council approved a dual tax structure of 5 per cent and 18 per cent, effectively removing the slabs of 18 per cent and 28 per cent.
Another proposal that was approved by the FM, a Group of Ministers and a Committee of Centre and State officials on the first day of deliberations is bringing a new rate of 40 per cent for 5-7 goods, while maintaining special rates of 0, 0.25, 1 and 3 per cent.
Also Read: GST 2.0: Non-BJP states discuss compensation for revenue losses
Meanwhile, garments and footwear will be taxed under two categories based on their M.R.P. Garments priced below ₹2,500 will continue to attract 5 per cent tax. The same will be applicable for some categories where the rate is 12 per cent.
The Council also approved exemption of health insurance premiums from GST for senior citizens and slashed rates for life saving drugs.
The rejig, which was first announced by Prime Minister Narendra Modi during his Independence Day speech, is widely seen as a stepping stone towards GST 2.0, with rate rationalisation and slab consolidation at the core of discussions. Late Wednesday, the PM expressed his pleasure at the collective agreement of proposals submitted by the Union Government, which he said "will benefit the common man, farmers, MSMEs, middle-class, women and youth".
Economic headwinds from the US tariffs is said to have spurred this overhaul to push domestic demand, with the Prime Minister famously calling for adoption of locally-manufactured or ‘swadeshi’ goods over imported items.
Not only is the new structure aimed at simplifying compliance and reducing disputes, the rate cuts on mass-consumption items will invariably bolster domestic demand. With GST registration procedure simplified, the government has focused on ease-of-doing-business for Micro, Small, and Medium Enterprises (MSMEs).
While policymakers devise a mechanism to balance revenue concerns, today’s deliberations signal a shift towards a cleaner and more growth-supportive indirect tax framework at a time when exporters are facing external headwinds.
Follow us
