The 56th GST Council meeting cleared all the proposed changes in the Goods and Services Tax (GST), including the approval of a two-rate tax structure. Taxes on daily-use items have been reduced in most cases, with several items in the 18% and 12% slabs brought down to 5%. Many goods in the 28% slab were also reduced to 18%. All these rates will come into effect from September 22.
Addressing the media after the GST Council meeting, which went on past 9 PM, Finance Minister Nirmala Sitharaman said the effort has been not just to reduce rates on items but also to ease the compliance burden.
“We have corrected inverted duty structure problems, resolved classification-related issues, and ensured stability and predictability in GST. There has been a rationalisation of rates—slabs have been reduced to just two. We are also addressing issues of compensation cess, simplifying registration, return filing, and refunds,” the finance minister said.
She added that the reforms have been carried out with a focus on the common man.
Goods that have moved to the 5% slab from 18% or 12% include hair oil, toilet soaps, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware, and other household articles. Many food items, including namkeen, bhujia, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, and ghee, have also been shifted to the 5% slab from the existing 12% or 18%.
Items that have moved from 5% to nil include ultra-high temperature (UHT) milk, paneer, and all Indian breads such as chapati and roti.
Rates on middle-class aspiration goods like washing machines, TVs (all sizes, now at 18%), small cars, and motorcycles up to 350cc have been reduced from 28% to 18%.
The finance minister said that labour-intensive industries have received strong support. “Farmers and agriculture as a whole will benefit, and the health sector too will see gains. The key drivers of the economy have been given prominence,” Sitharaman said.
Taxes on agricultural goods such as tractors, horticultural and forestry machines, harvesting/threshing machines, balers, and composting machines have been reduced from 12% to 5%.
Goods manufactured by labour-intensive sectors such as handicrafts, marble, granite blocks, and intermediate leather goods have also been brought down to 5%.
Rates on health-related items have seen sharp cuts: 33 life-saving drugs and medicines have been reduced to zero, while several others have been brought down from 12% or 5% to zero. Three critical medicines for cancer, rare diseases, and chronic illnesses have also moved to zero. Diagnostic kits, reagents, and glucose monitoring systems have been reduced to 5%. Spectacles and vision-correcting goggles have been cut from 28% to 5%.
Individual health and life insurance have been exempted from GST. Earlier, premium paid towards these policies was taxed at 18%.
In the automotive sector, small cars and motorcycles will now be taxed at 18% instead of 28%. Buses, trucks, and ambulances will also attract 18% instead of 28%, while three-wheelers will be taxed at 18% instead of 28%. All auto parts will be taxed at 18%. Electric vehicles will continue to attract 5% GST.
Overall revenue losses due to these changes have been estimated at Rs 47,700 crore.