From groceries and medicines to cement and small cars, a wide range of essentials will now cost less after the GST Council approved new changes in indirect taxes at its 56th meeting.
At the same time, some luxury and non-essential products will become significantly more expensive as the GST Council raised rates on tobacco, fizzy drinks, and high-end vehicles.
These reforms take a multi-sectoral and multi-thematic approach, designed to enhance ease of living for citizens and ease of doing business for enterprises: Office of Finance Minister Nirmala Sitharaman. Here is a breakdown of what has been changed from the previous regimen.
GST Reforms
| Items | From | To |
| Daily Essentials | ||
| Hair oil shampoo, Toothpaste, toilet soap toilet tissues | 18% | 5% |
| Butter Ghee, pre-packaged namkeens, feeding bottles, napkins, Sewing machines, parts | 12% | 5% |
| Individual health care insurance premium/ Thermometer | 18% | Nil 5% |
| Medical Grade Oxygen, all diagnostic glucometers, and corrective spectacles | 12% | 5% |
| Affordable Education | ||
| Maps, charts, pencils, sharpeners, crayons, exercise books, erasers | 12% | Nil |
| Uplifting Farmers and Agriculture | ||
| tractor, specified bio pesticides, drip irrigation, Tarctor Tyres and Parts, | 18% 12% | 5% 5% |
| tractor, specified bio pesticides, drip iirrigation , agr | 12% | 5% |
| Electronics | ||
| Monitors and projectors nd dishwashing machines | 28% | 18% |
| Air Conditioners | 28% | 18% |
| Television ( above 32″), Including LED and LCD TVs) | 28% | 18% |
| Automobiles | ||
| Pterol and Petrol Hybrid, LPG, CNG Cars not exceeding 1200cc and 4000mm Diesel and Diesel Hybrid cars, 3-wheeled vehicles, bikes and motor vehicles for commercial use | 28% | 18% |
In a post on X, Prime Minister Narendra Modi recalled his Independence Day address where he had announced the government’s intent to introduce next-generation GST reforms. He noted that the Union Government had drafted a comprehensive proposal for broad-based GST rate rationalisation and process improvements, with the twin goals of making life easier for citizens and strengthening the economy. Modi said he was pleased that the GST Council, comprising both the Union and the States, had unanimously endorsed these proposals on rate cuts and reforms, which will directly benefit farmers, MSMEs, women, youth, the middle class, and small businesses. “These wide-ranging reforms will uplift lives across the country and make doing business, especially for small traders, much simpler,” he added.
The Current System and Why It Needed Reform
Until now, GST has been structured into four slabs — 5%, 12%, 18%, and 28%. However, the GST Council observed that revenue from the 18% slab alone contributed about two-thirds of total GST income, nearly 67%, over the last eight years. By contrast, the 12% slab yielded the least, accounting for only around 5% of collections. The 5% and 28% slabs contributed about 7% and 11% respectively. Given this imbalance, the council decided to remove two slabs: 12%, as its revenue contribution was negligible, and 28%, in the hope that cutting levies on luxury goods would encourage manufacturers to reduce prices. The 5% and 18% slabs together generated nearly three-fourths (74%) of the GST revenue, which amounted to ₹11.37 lakh crore in 2020–21,
Also Read: GST Council Approves Two-Tier Tax Structure Of 5% And 18%, To Be Implemented From September 22
