Finance
The GST Council has approved major modifications to India’s indirect tax system, including a streamlined two-slab structure of 5% and 18%. Beginning September 22, a wide range of goods and services will become more affordable, but specific sin and luxury items will face higher taxes.
Several products that were previously taxed at 12 or 28 percent will now fall into the lower brackets. This approach will reduce the cost of groceries, fertilizer, footwear, textiles, renewable energy, and even healthcare products.
The new tax system, which was agreed on Wednesday, now has two major slabs of 5% and 18%, with a whopping 40% for sin items.
For the average person, this move puts more money in their hands, which the government believes will be reinvested in the economy, providing it a big boost.
From groceries and fertilizer to footwear, textiles, and even renewable energy, a wide range of goods and services will become more cheap. Items previously taxed at 12% and 28% will now mostly shift to the other two slabs, making a wide range of things cheaper.
Food and daily essentials-
Milk products: Ultra-high temperature (UHT) milk will now be tax-free (down from 5 per cent), while condensed milk, butter, ghee, paneer, and cheese have moved from 12 per cent to 5 per cent or nil in some cases.
Staple foods: Malt, starches, pasta, cornflakes, biscuits, and even chocolates and cocoa products will see rates reduced from 12–18 per cent to 5 per cent.
Dry fruits and nuts: Almonds, pistachios, hazelnuts, cashews, and dates, earlier taxed at 12 per cent, will now attract just 5 per cent.
Sugar and confectionery: Refined sugar, sugar syrups, and confectionery items like toffees and candy have shifted to the 5 per cent slab.
Other packaged foods: Vegetable oils, animal fats, edible spreads, sausages, meat preparations, fish products, and malt extract-based packaged foods have been moved to the 5 per cent slab.
Namkeens, bhujia, mixture, chabena and similar edible preparations ready for consumption form (other than roasted gram), pre-packaged and labelled to go from 18 per cent to 5 per cent.
Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter, nor flavoured to move from 18 per cent to 5 per cent.
Agriculture and fertilisers- Fertilisers are down from 12 per cent/18 per cent to 5 per cent.
Select agricultural inputs, including seeds and crop nutrients, have been rationalised from 12 per cent to 5 per cent.
The GST Council has reduced tax rates on a wide range of farm-related products, providing comfort to both farmers and consumers ahead of the festive season. The tax on agricultural machinery has been cut from 12% to 5%. This includes hand pumps, drip irrigation nozzles, sprinklers, machinery for soil preparation, harvesting, and threshing, composting machines, tractors (except high-capacity road tractors), self-loading agricultural trailers.
Key fertiliser inputs like sulphuric acid, nitric acid, and ammonia will now be taxed at 5% rather than 18%. Fertilizers, crop nutrients, and seeds will all be taxed at 5%, down from 12-18%. Tractor parts, including tyres, tubes, hydraulic pumps, gear boxes, axles, brake assemblies, radiators, and cooling systems, have been brought down from 18 per cent to 5 per cent.
Healthcare
Life-saving drugs, health-related products, and some medical devices have seen rate cuts from 12 per cent/18 per cent to 5 per cent or nil.
Individual life and health insurance policies, including family floater, which had a 12 per cent tax, will no longer be taxed
A massive chunk of medical items of regular use — including thermometers and glucometers — will be in the 5 per cent tax bracket.
Health and life insurance premiums, earlier taxed at 18 per cent, are now exempt.
Consumer goods – Entry-level and mass-use items like select electrical appliances will move from 28 per cent to 18 per cent.
Footwear and textiles have seen GST cut from 12 per cent to 5 per cent, reducing costs for mass-market products.
Common use items- Several everyday products will see lower taxes. School-related supplies like eraser maps, sharpeners, and exercise books have also been made tax-free. Personal-use items such as hair oil, shampoo, toothpaste, toothbrushes, face powder, soap, talcum powder, and cosmetics have been reduced from 18 per cent to 5 per cent. Tooth powder, feeding bottles, utensils, bicycles, bamboo furniture, umbrellas, and combs have moved from 12 per cent to 5 per cent.
However, certain goods and services remain firmly under higher taxation.
Pan masala, gutkha, cigarettes, chewing tobacco, zarda, unmanufactured tobacco, and bidi will continue under existing high GST rates and compensation cess until outstanding cess-linked loans are cleared.
Additionally, the valuation of these products will now be shifted to Retail Sale Price (RSP) instead of transaction value, tightening compliance.
All goods (including aerated waters), containing added sugar or other sweetening matter or flavoured to go from 28 per cent to 40 per cent.
A new 40 per cent slab for sin and luxury goods remains, ensuring that items like cigarettes, premium liquor, and high-end cars don’t see tax relief.
The restructure is one of the most substantial tax overhauls since the introduction of GST, with the goal of simplifying rates while keeping necessary commodities inexpensive and luxury or damaging products severely taxed.
