The announcement made by Prime Minister Narendra Modi regarding GST on August 15 was approved in the GST Council meeting. The changes were approved in the GST Council meeting chaired by Finance Minister Nirmala Sitharaman on Wednesday. Now there will be only 2 slabs in GST instead of 4. Apart from this, there will be another slab of 40%, which will be applicable on luxury items and things like tobacco and cigarettes.
GST earlier had slabs of 5%, 12%, 18% and 28%. Now in their place there will be only 5% and 18% slabs. These new GST rates will be applicable from 22nd September i.e. the first day of Navratri.
Now GST on many everyday items has been reduced to 0. Many such things, which were taxed at 12% and 18% till now, have now been reduced to 5%. At the same time, many things which till now were under the ambit of 28% GST, have now been brought under the ambit of 18%.
Such a big change has happened in GST after 8 years. GST was implemented on 1 July 2017. States say that changes in GST will lead to loss of their revenue. However, the Center argues that as things become cheaper, consumption will increase and the loss will be compensated in the times to come.
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What will change with the changes in GST?
food items
Tax on milk, chhena, paneer, pizza bread, khakhra, plain chapati or roti has been reduced from 5% to 0. Now there will be no tax on Paratha, whereas till now there was 18% tax on it.
The tax rate on goods ranging from butter and ghee to dry fruits, condensed milk, cheese, figs, dates, avocado, citrus fruits, sausages and meat, sugar confectionaries, jams and fruit jellies, coconut water, namkeen, water packed in 20 liter bottles, fruit pulp or juice, milk, ice cream, pastries and biscuits, corn flakes and cereal containing beverages and sugar based sweets is 12% or Will be reduced from 18% to 5%.
There will now be no tax on erasers, maps, pencils, sharpeners and exercise books instead of 5%. Now the tax on daily used items like milk bottles, kitchen utensils, umbrellas, utensils, bicycles, bamboo furniture and combs will be 5% instead of 12%. GST on shampoo, talcum powder, toothpaste, toothbrush, face powder, soap and hair oil has also been reduced from 18% to 5%.
farming related goods
The GST Council has also approved exemption in tax on agriculture and dairy products in the meeting.
GST on many agricultural equipment has been reduced from 12% to 5%. These include diesel engines up to 15 horse power capacity, hand pumps, drip irrigation equipment and nozzles for sprinklers, agricultural and horticultural machinery for soil preparation, harvesting and threshing machinery, composting machines and tractors (except tractors for semi-trailers with engine capacity more than 1800 cc).
GST on key fertilizer raw materials including sulfuric acid, nitric acid and ammonia has been reduced from 18% to 5%. GST on many bio-pesticides including neem-based pesticides has now been reduced from 12% to 5%.
GST on tractor rear tires and tubes, agricultural diesel engines with cylinder capacity more than 250 cc for tractors, hydraulic pumps for tractors and various tractor components has been reduced from 18% to 5%.
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Affordable from TV-washing machine to car-bike
The council has also reduced the tax on motorcycles up to 350 cc and items like air conditioners, dishwashers and TVs from 28% to 18%.
With this, the tax rate on petrol, LPG and CNG vehicles with engines less than 1,200 cc and length less than 4,000 mm and diesel vehicles with engines less than 1,500 cc and length up to 4,000 mm will be reduced from the current 28% to 18%.
Like before, 5% GST will be applicable on electric vehicles. GST on cement has also been reduced from 28% to 18%. This will make building a house cheaper.
GST also reduced on medicines and insurance
The government has also reduced the GST on medicines and insurance. GST on 33 life saving medicines has been reduced from 12% to 0%. At the same time, tax on 3 medicines used in the treatment of cancer and rare diseases has been reduced from 5% to 0%. Whereas, GST on all other medicines has been reduced from 12% to 5%.
Apart from this, GST Council has abolished the GST applicable on insurance policies. The GST Council has decided to remove GST on payment of premium for life insurance and health insurance policies. This will make it cheaper for people to take insurance policies.
Tax reduced on clothes and shoes also
The GST Council has also reduced the tax on clothes and shoes priced below Rs 2,500. GST on clothes priced below Rs 2,500 has been reduced from 12% to 5%. However, clothes costing more than this will now attract 18% GST instead of 12%.
Similarly, tax on shoes priced below Rs 2,500 has also been reduced from 12% to 5%. Now 18% GST will be charged on shoes more expensive than this instead of 12%.
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luxury items will be expensive
Expensive cars and luxury items will become expensive. All vehicles above 1,200 cc and longer than 4,000 mm, motorcycles with capacity above 350 cc and private jets and racing cars will be taxed at 40%.
Cold drinks and non-alcoholic drinks will also become costlier now. The GST Council has increased the existing 28% tax on carbonated drinks to 40%. Carbonated drinks with fruit juice will also attract 40% GST instead of 28%.
Non-alcoholic drinks GST has also been increased from 18% to 40%. Even high sugar or sweet drinks will now be taxed at 40% instead of 28%.
40% GST will also be imposed on race clubs, lease or rental services and casinos, gambling, horse racing, lotteries and online money gaming.
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Loss of Rs 48,000 crore but will be compensated soon
There will also be losses due to changes in GST. Taxes on many things have been reduced or abolished. Revenue Secretary Arvind Srivastava said that due to change in GST slab, there is an estimated loss of Rs 48 thousand crore.
However, it is believed that consumption will increase as things become cheaper. India’s economy is highly dependent on consumption. The personal consumption market was expected to contribute 61.4% to GST in 2024-25.
The government has made this change in GST at a time when America has increased the tariff on Indian imports by 50%. Economists believe that by the second year of implementation of GST reforms, GDP may increase by 0.5% more, which will neutralize the US tariffs.
At the same time, states will also suffer losses due to changes in GST. Because states get a share in GST. Finance Minister Nirmala Sitharaman said that to compensate for the losses incurred by the states, 28% GST as well as compensation cess will be applicable on beedis, cigarettes, pan masala, gutkha and tobacco.
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