In a landmark move ahead of the festive season, the Goods and Services Tax (GST) Council has slashed rates across hundreds of items and streamlined the country’s indirect tax structure.
The 56th meeting of the Council, chaired by Finance Minister Nirmala Sitharaman and attended by state finance ministers, approved a simplified two-slab system of 5 per cent and 18 per cent, replacing the previous four-tier structure.
Sitharaman said the changes were designed to ease the financial burden on households and the middle class while correcting long-standing distortions in multiple sectors. The new rates will take effect from September 22.
Everyday household goods such as hair oil, soaps, shampoos, toothbrushes, toothpaste, bicycles, tableware and kitchenware will now attract only 5 per cent GST.
Ultra-high temperature milk, paneer, chhena and all Indian breads, including roti and paratha, will be fully exempt from GST.
A host of popular food products, from namkeen and sauces to noodles, chocolates, butter, ghee and cornflakes, will now be taxed at 5 per cent, down from 12 or 18 per cent previously.
Life-saving drugs for cancer, rare diseases and other critical conditions will either be exempt from GST or moved to the lowest bracket. Spectacles and corrective goggles will now attract 5 per cent instead of 28 per cent.
Vehicles, Insurance & Industrial Goods Get Relief
The government will now tax vehicles, including small cars, motorcycles under 350 cc, three-wheelers, buses, trucks and ambulances, at 18 per cent instead of 28 per cent.
Air conditioners, large-screen televisions, dishwashers and auto parts will also fall under the 18 per cent slab. Mid-size and large cars, high-capacity motorcycles, yachts, private aircraft and helicopters will continue to attract a special rate of 40 per cent, along with tobacco and other so-called ‘sin goods’.
Insurance premiums for all individual life and health policies, including term, ULIP, family floater and senior citizen plans, will be exempt from GST to make coverage more affordable.
The government has moved tractors, agricultural machinery, bio-pesticides, renewable energy equipment, natural menthol and handicrafts to the 5 per cent slab.
The government has reduced cement from 28 per cent to 18 per cent and corrected inverted duty structures in textiles, fertilisers and man-made fibres.
The Council described the reforms as ‘next-generation GST’, designed to spur consumption, ease compliance for micro, small and medium enterprises (MSMEs) and eliminate duty inversion in key sectors.
By reducing the number of slabs and lowering rates on mass-consumption goods, the government hopes to boost demand at a time of global trade uncertainty.
The meeting concluded a day earlier than scheduled, signalling unanimous agreement among states on the overhaul. With the new rates taking effect on September 22, consumers can expect significant price relief on essential items and services.
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