India cut the goods and services tax on small cars, televisions, air conditioners, textiles and a range of household goods from September 22, in a major rate overhaul aimed at spurring consumption ahead of the festive season, even as Trump's tariffs threaten the country's exports.
The 56th meeting of the GST Council on Wednesday, chaired by Finance Minister Nirmala Sitharaman and comprising state ministers, approved a two-tier rate structure of 5 percent and 18 percent.
Addressing reporters after the meeting, Finance Minister Nirmala Sitharaman said that the changes were brought about keeping the interests of the common man and the middle class in mind. "Items on which GST has been reduced to 5 percent — hair oil, toilet soap, soap bars, shampoos, toothbrushes, toothpaste, bicycles, tableware, kitchenware, and other household articles."
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Further, she spelled out items on which GST has been reduced to zero from 5 percent — 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," she added.
Talking about items that will see a reduction of GST from 12 percent or from 18 percent to 5 percent, she said, "Food items - namkeen, bhujiya, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes, butter, ghee, all these are in 5%."
"Reduction from 28 percent to 18 percent — air conditioning machines, TVs which are over 32 inches, all TVs now at 18 percent, dishwashing machines, small cars, motorcycles equal to or less than 350 cc are all now coming to 18 percent," she added.
The FM announced that GST on life-saving drugs and medicines has been cut to zero. She said, "GST on 33 life-saving drugs and medicines has come down from 12 percent to zero. From 5 to 0 and 3 life-saving drugs and medicines used for the treatment of cancer, rare diseases and other severe chronic diseases. There are several drugs and medicines coming down to 5 percent from 12 percent. Similarly, spectacles and goggles for correcting vision are also coming down to 5 percent from 28 percent."
She added, "Agriculture goods such as tractors, agricultural, horticultural and forestry machines for soil preparation or cultivation, harvesting or threshing machines, including straw or fodder balers, grass or hay movers, composting machines etc. are all coming down from 12 percent to 5 percent. Reduction of GST from 12 percent to 5 percent on 12 specified bio-pesticides."
"Also, from 12 to 5 is natural menthol... Again, from 12 to 5, handicrafts and also labour-intensive sectors," she added.
Talking about construction items, she informed, "Handicrafts, marble, travertine blocks, granite blocks, and intermediate leather goods. Reduction of GST on cement from 28 percent to 18 percent."
She further informed that GST rates have been reduced on small cars and motorcycles below 350cc. "GST reduced from 28 percent to 18 percent on small cars and motorcycles which are equal to or below 350 cc. Reduction of GST from 28 percent to 18 percent on buses, trucks, and ambulances. Uniform rate of 18 percent on all auto parts. Three wheelers from 28 to 18 percent. "The long-pending inverted duty structure problem is getting corrected for the man-made textile sector by reducing the GST rate on man-made fibre from 18 percent to 5 percent and man-made yarn from 12 to 5 percent," she said.
"We are also correcting the inverted duty structure problem in the fertiliser sector by reducing GST from 18 percent to 5 percent on sulfuric acid, nitric acid and ammonia," the FM added.
She further said, "Reduction of GST from 12 percent to 5 percent on renewable energy devices and parts for their manufacture such as biogas plants, windmills, wind-operated electricity generators, waste to energy plants, devices, PV cells, whether or not assembled in modules or made up in panel, solar cookers, solar water heaters and systems and so on."
About the highly-talked about insurance premiums, she said GST has been exempted on all individual life insurance policies — term life, ULIP, or endowment policies, and reinsurance. "Insurance services from 18% currently will go into two, three different categories. Exemption of GST on all individual life insurance policies, whether term life, ULIP, or endowment policies, and reinsurance thereof, to make insurance affordable for the common man and increase the insurance coverage in the country. Exemption of GST on all individual health insurance policies, including family floater policies and policies for senior citizens, and reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage in the country," she added.
Talking about tax rates for vehicles, she said, "Mid-size and large cars, motorcycles of engine capacity exceeding 350 cc, aircrafts- helicopters and aeroplanes for personal use, yachts and other vessels for pleasure or sports, are all under 40%."
The GST council discussed 'next-gen GST' reforms, which will lower tax rates on items of mass consumption, remove duty inversion in sectors, like textiles, and ease compliance burden for MSMEs.
The Council ended its deliberations a day sooner amid unanimous decision regarding reducing the number of slabs in GST to just two — 5 per cent and 18 per cent — and removing the 12 percent and 28 percent slabs.
Also, a special 40 percent tax was announced on a select few items, including tobacco and ultra-luxury goods, that are classified as 'sin goods'.
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