The GST In one of the most significant reforms since the introduction of the Goods and Services Tax (GST) in 2017, the GST Council on Wednesday approved a major revamp of the tax structure. The move is aimed at simplifying compliance, easing the burden on households, and bringing clarity across categories of goods and services.
Effective September 22, also the first day of Navratri, the new structure will replace the current four-tier system (5%, 12%, 18% and 28%) with a simplified two-slab regime of 5% and 18%, along with a 40% rate for luxury and sin goods such as high-end cars and tobacco products.
What changes for consumers?
The Council has reduced tax rates on several widely-used items -- from shampoos, soaps, and face powders to televisions, medicines, air conditioners, and small cars. Indian breads such as roti, paratha and porotta have been fully exempted, while agricultural equipment and renewable energy devices have also been brought into the lowest tax bracket.
Luxury and sin goods, however, will remain expensive. While tobacco products will eventually fall under the new 40% rate, they will continue with the current regime until cess-related adjustments are completed.
FAQs on the new GST regime
1. When do the new rates take effect? The revised GST rates will apply from September 22. Tobacco-related items such as cigarettes and chewing tobacco will continue under the existing structure for now, with new rates to be notified later.
2. What is the new GST rate on medicines?
All medicines will be taxed at 5%, unless specifically exempted.
3. How will air conditioners, TVs and dishwashers be taxed?
The GST on air conditioners and dishwashers has been slashed from 28% to 18%. All TVs and monitors, regardless of size, will also be taxed at 18%.
4. What about agricultural machinery?
Farm equipment such as sprinklers, harvesters and composting machines will now attract 5% GST, significantly down from 12%.
5. Are small cars getting cheaper?
Yes. GST on small cars, defined as petrol/LPG/CNG cars up to 1200cc and 4000mm length, and diesel cars up to 1500cc and 4000mm length, has been reduced from 28% to 18%.
6. What about renewable energy equipment?
Renewable energy devices and components will be taxed at 5%, down from 12%.
7. Why reduce GST on items like shampoos and face powders?
These are mass-consumption goods. The uniform rate avoids classification disputes between “luxury” and “regular” variants, simplifying compliance and benefiting consumers.
8. How are beauty and wellness services taxed now?
Services such as salons, gyms, yoga centres and health clubs will be taxed at 5% without input tax credit (ITC). Previously, they attracted 18%.
9. What about passenger transport services?
They will be taxed at 5% without ITC. However, operators can choose to charge 18% with full ITC.
10. Is GST applicable on sporting event tickets?
Entry to recognised sporting events priced below ₹500 remains exempt. Tickets above ₹500 will attract 18% GST.
Treatment of old stock and invoices
Meanwhile, supplies made before the rate cut but invoiced later will be taxed based on the date of payment -- payments before the cut attract old rates, while payments afterwards fall under the new structure. Businesses can continue to claim input tax credit on existing stock, provided tax was correctly charged at purchase.
By reducing GST on essentials such as soaps, medicines and farm equipment, the Council hopes to ease household budgets and support farmers. At the same time, keeping a higher slab for luxury and sin goods ensures revenue stability.
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