The Council cleared a two-tier tax structure with rates of 5 per cent and 18 per cent, along with a new 40 per cent slab for sin and luxury goods. The decision will come into effect from September 22, Union Finance Minister Nirmala Sitharaman announced.
The 56th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman on Wednesday, approved the rationalisation of GST rates, abolishing the 12 per cent and 28 per cent slabs. The new slab structure will come into effect from September 22, the first day of Navaratri.
The Council cleared a two-tier tax structure with rates of 5 per cent and 18 per cent, along with a new 40 per cent slab for sin and luxury goods. However, tobacco products and cigarettes will continue to attract 28 pc GST, plus compensation cess, till loans are repaid.
“These reforms have been carried out with a focus on the common man. Every tax on the common man’s daily use items has gone through a rigorous review and in most cases the rates have come down drastically. Labour-intensive industries have been given good support. Farmers and the agriculture sector, as well as the health sector, will benefit. Key drivers of the economy will be given prominence,” Sitharaman said after the GST Council meeting.
As part of the restructuring, 175 broad items of mass consumption, including milk, paneer, snacks and bread, will become cheaper. Goods such as hair oil, toilet soaps, shampoos, toothbrushes, tableware, and kitchenware will now fall under the 5 per cent bracket.
Items like UHT milk, paneer, chenna and all kinds of Indian breads, will move from 5 per cent to nil. Spectacles will now be taxed at 5 per cent.
Around 99 per cent of items currently taxed at 12 per cent will now fall under 5 per cent, including natural menthol, fertilisers, handicrafts, and several labour-intensive sectors such as marble and granite blocks. Additionally, 33 life-saving drugs and medicines will move from 12 per cent to nil.
Nearly 90 per cent of goods currently taxed at 28 per cent will shift to 18 per cent. This includes air-conditioning machines, televisions above 32 inches – with all TVs now under 18 per cent – dishwashing machines, cement, and small cars and motorcycles below 300 cc.
Automobiles such as small cars up to 350 cc, buses, trucks, ambulances and auto parts will also move to the 18 per cent slab. Dishwashing machines and bikes will remain in the 18 per cent category.
The inverted duty structure has also been corrected, with man-made fibre moving from 18 per cent to 5 per cent and man-made yarn from 12 per cent to 5 per cent.
The Council also approved a new 40 per cent GST rate for sin and super luxury goods. The higher slab will apply to items such as paan masala, tobacco, cigarettes, bidis, aerated water, carbonated and caffeinated beverages, as well as luxury items like motorcycles exceeding 350 cc, yachts and helicopters.
Importantly, GST will now be levied on the retail sale price (RSP) of paan masala and tobacco instead of the wholesale value.
“All TVs will now be taxed at 18 per cent, and life-saving cancer drugs will be taxed at nil,” Sitharaman added, noting that the reforms were designed to give relief to the middle class and provide a fillip to growth sectors of the economy.
Prime Minister Narendra Modi welcomed the move, recalling his Independence Day assurance of next-generation reforms in GST.
