The 56th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman on Wednesday, approved a major rationalisation of GST rates, scrapping the existing 12 per cent and 28 per cent slabs.
New GST slabs announced
The Council cleared a simplified two-rate structure of 5 per cent and 18 per cent, while introducing a new 40 per cent slab for sin and luxury goods. The changes will take effect from September 22, Sitharaman announced after the marathon meeting.
Sitharaman said all states had agreed to the rate rationalisation, calling it a consensus-driven decision. West Bengal Finance Minister Chandrima Bhattacharya estimated the total revenue loss from the move at Rs 47,700 crore.
Uttar Pradesh Finance Minister Suresh Khanna noted that no final decision had been made on the tax incidence for demerit goods, adding that any levy beyond the 40 per cent rate would be decided later.
The 56th meeting of the GST Council stretched for 10.5 hours, with the Centre and states negotiating key tax proposals in detail.
Focus on the common man: Finance minister
Addressing the post-meeting press conference, the finance minister said the reforms have been brought in the form of revised GST slabs with the middle class and common man in focus. "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 a good support. Farmers and the agriculture sector, as well as the health sector, will benefit. Key drivers of the economy will be given prominence," she said.
GST reforms: What gets cheaper?
She added that for common man and middle class items, there will be a complete reduction. The items on which GST has been reduced to 5 per cent are: hair oil, toilet soap, soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware, and other household articles, Sitharaman said.
"Items on which GST has been reduced to zero from 5 per cent are: ultra-high temperature milk, chena and paneer. All the Indian breads will see a nil rate. So roti or paratha or whatever it is, they all come to nil. Reduction of GST from 12% or from 18 % to 5 -- Food items- Namkeen, bujjiya, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, ghee, all these are in 5%. Reduction from 28 % to 18%- Air conditioning machines, TVs which are over 32 inches, all TVs now at 18%, Dishwashing machines, small cars, and motorcycles equal to or less than 350 cc are all now coming to 18 %," she added.
Special 40% GST slab
“There is a special rate of 40 per cent, while almost all other goods fall under either 18 per cent or 5 per cent. This special rate, meant only for sin and super luxury goods, has been cleared and will apply exclusively to products such as paan masala, cigarettes, gutka, chewing tobacco, zarda, unmanufactured tobacco and bidis,” the Finance Minister said.
This slab will include all goods such as aerated waters with added sugar or other sweeteners, flavoured or caffeinated beverages, carbonated fruit drinks, carbonated beverages with fruit juice and other non-alcoholic drinks, except those specified at lower rates, will also fall under the 40 per cent slab.
Ease of living for common man: PM Modi
Reacting to the GST reforms announcement, Prime Minister Narendra Modi said the decision is aimed at bringing ease of living for the common man.
"Glad to state that the GST Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women and youth," he said in a post on X.
