The Goods and Services Tax (GST) Council, in its 56th meeting held on September 3, announced cuts in tax rates across a range of goods and services such as in health insurance and hair oil in a massive relief for consumers.
The Council also approved the restructuring GST regime that will see the implementation of two rates of 5 percent and 18 percent, dropping 12 percent and 28 percent tax slabs. Moreover, a 40 percent tax rate will be introduced for super luxury and sin goods.
The proposals were passed during the Council’s meeting on Wednesday. The Central government hopes to boost domestic spending and cushion economic blow of the US tariffs with the new changes.
Union Finance Minister Nirmala Sitharaman, who chaired the meeting, said all decisions were taken unanimously, with no disagreement with any state.
Here's a quick list of items that will get cheaper from September 22.
Daily use items that will get cheaper
While daily use food items will continue to attract nil tax rate, common use food and beverages ranging from butter and ghee to dry nuts, condensed milk, sausages and meat, sugar boiled confectionery, jam and fruit jellies, tender coconut water, namkeen, drinking water packed in 20-litre bottles, fruit pulp or fruit juice, beverages containing milk, ice cream, pastry and biscuits, corn flakes and cereals, and sugar confectionery are likely to see a cut in tax rate to 5 percent from the current 18 percent.
All forms of chapati and paratha will be charged nil tax, down from the current rate of 5 per cent.
Consumer goods such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see rate cut from 12 percent to 5 percent. The rates on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil has been cut down to 5 percent from 18 percent.
What about health and life insurance policies
All individual life and health insurance policies will now attract nil tax in a bid to boost coverage and relief for taxpayers, Sitharaman said.
Real estate boost
Sitharaman announced that cement will now cost less with tax rate slashed to 18 percent from 28 percent.
Relief for cars and bike buyers
Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length, too, would move to 18 percent rate from 28 percent.
All cars larger than 1,200 cc for petrol and 1,500 cc for diesel will be charged at 40 percent, the finance minister said. Motorcycles up to 350 cc will attract 18 percent tax.
All automobiles above 1,200 cc and longer than 4,000 mm as well as motorcycles above 350 cc, yachts and aircrafts for personal use, and racing cars will be attracting a 40 percent levy.
EVs will continue to be charged at 5 percent GST.
Consumer electronics goods
Consumer electronics like air-conditioners, dishwashers, and TVs, too, will be taxed at lower GST of 18 percent as against 28 percent currently.
When will the new rates become applicable
The new rates for all products, except gutkha, tobacco and tobacco products and cigarettes, will be effective September 22 -- the first day of Navratri, she said.
Tobacco, gutkha, tobacco products and cigarettes will continue to be charged at current 28 per cent plus a compensation cess till such time that loans taken to pay states for revenue loss is fully paid back, Sitharaman added.
The implication on the economy
The financial implication of the rate rationalisation would be Rs 48,000 crore and this would be fiscally sustainable, Revenue Secretary Arvind Shrivastava told reporters here.
The decision by the GST Council would bring down the overall premium as the tax component has significantly come down.
With PTI inputs
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