Tax cut bonanza cleared in GST regime overhaul

Fewer GST slabs: Most goods now 5%, 18%

- Rajeev Jayaswal

Taxes on goods spanning household essentials, medicines, small cars and appliances will be slashed from September 22 as the GST Council on Wednesday approved the most sweeping overhaul of India’s consumption tax since its 2017 launch, affecting everything from toothpaste and insurance to tractors and cement.

The changes, announced by Union finance minister Nirmala Sitharaman after a marathon meeting of the 56th GST Council, will have a net revenue implication of ₹48,000 crore based on 2023-24 consumption patterns but represent a gamble on growth by boosting domestic demand ata time when exports face headwinds from punishing US tariffs.

More than 90% of goods across multiple categories will become cheaper as the government whittles down the GST structure from four slabs to essentially two main rates of 5% and 18%, with a special 40% levy reserved for luxury and sin goods.

“The Prime Minister actually set the tone for the next-generation reforms on the 15th of August when he spoke from the Red Fort and he desired that we give the benefit to the people at the earliest,” Sitharaman said, concluding the meeting that was scheduled for two days but wrapped up in one with intense deliberations.

In recent days, industry groups have announced they will pass on the benefits of these cuts immediately to consumers - a move that will be critical to the government's goal of spurring consumption.

The minister said an item-wise “rigorous exercise” was undertaken and in most cases, tax rates were brought down drastically. “Labour intensive industry have been given support. Farmers and agriculture, as a whole, will also benefit by the decisions we've taken today.

Health-related also will benefit.

So, the key drivers of economy have been given a prominence," Sitharaman said.