New Delhi: The Goods and Services Tax (GST) Council, in its 56th meeting on Wednesday, approved GST 2.0, marking the biggest reform since its rollout in 2017. The Council cleared a two-slab tax structure of 5% and 18%, with a special 40% rate only for luxury, sin, and demerit goods.
The reforms aim to reduce the tax burden on common people, ease compliance, free blocked working capital, and improve ease of doing business through automated refunds and faster registration.
Key GST Rate Changes
From September 22 (Navratri), most rate cuts will take effect:
- Essential food & household items: GST slashed to 5% from 12–18% on goods like butter, cheese, condensed milk, pasta, coconut water, soya milk, nuts, dates, and sausages. Ultra-high temperature milk, paneer, pizza bread, khakra, plain roti, and erasers will now attract zero GST.
- Household products: Hair oil, soap, shampoos, toothpaste, toothbrushes, bicycles, kitchenware, and tableware reduced to 5%.
- Medical items: Medical oxygen, gauze, bandages, diagnostic kits brought down to 5% from 12%.
- Electronics & white goods: Air conditioners, TVs, and dishwashers reduced to 18% from 28%.
- Automobiles: Small cars and motorcycles under 350cc moved to the 18% slab, while bigger cars fall under the 40% demerit rate. All EVs remain at 5%.
- Insurance: Complete GST exemption on life and health insurance, including term, ULIP, family floater, and senior citizen plans.
- Services: Gyms, salons, barbers, and yoga centers cut to 5% from 18%.
Industry Impact
The Confederation of Indian Industry (CII) welcomed the rationalisation, calling it “pathbreaking.” Businesses assured that benefits would be passed on to consumers, easing costs for households and boosting demand.
Revenue Secretary Arvind Shrivastava estimated a net fiscal implication of ₹48,000 crore, but clarified this was sustainable. The reforms also resolved the long-pending inverted duty structure in textiles and fertilisers, cutting GST on inputs like manmade fibre, yarn, sulphuric acid, nitric acid, and ammonia to 5%.
Leaders’ Remarks
Finance Minister Nirmala Sitharaman said the reforms were designed to benefit the common man, MSMEs, farmers, and labour-intensive sectors. Prime Minister Narendra Modi praised the Council’s consensus, calling the reforms a “historic step towards easing living and doing business.”