New Delhi, Sept 4: In a landmark decision, the GST Council has approved a complete overhaul of India’s consumption tax system — the most sweeping reform since the launch of GST in 2017. The new structure, effective September 22, reduces the existing four slabs of 5%, 12%, 18%, and 28% to a two-tier system of 5% and 18%, with a special 40% levy on luxury and sin goods such as high-end cars, tobacco, and aerated drinks.
What Gets Cheaper?
The council’s move is expected to benefit households, farmers, and small businesses by making everyday goods more affordable:
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Food & Beverages: Chapati, paranthas, paneer, UHT milk, pizza bread, khakra, butter, ghee, dry fruits, jams, ice cream, biscuits, cereals, namkeen, and fruit juices will attract only 5% GST (down from 12–18%).
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Household Goods: Toothpaste, shampoo, hair oil, soaps, umbrellas, bicycles, bamboo furniture, utensils, and tableware will now be taxed at 5% instead of 12–18%.
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Appliances: Air-conditioners, dishwashers, and TVs shift to 18% GST (earlier 28%).
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Stationery: Pencils, notebooks, maps, crayons, and erasers are now zero-taxed.
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Footwear & Textiles: GST reduced from 12% to 5%.
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Healthcare: Life-saving drugs, diagnostic kits, thermometers, medical oxygen, glucometers, and corrective spectacles will see rates cut to 5% or nil.
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Insurance: Life and health insurance policies will now attract zero GST.
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Transport & Travel: Economy flight tickets at 5% GST; hotel rooms under ₹7,500 now taxed at 5% without ITC.
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Vehicles: Motorcycles up to 350cc and small cars at 18% GST; EVs remain at 5%.
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Construction: Cement taxed at 18% (down from 28%).
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Agriculture: Tractors, diesel engines, pumps, sprayers, and fertiliser inputs like ammonia and sulphuric acid reduced to 5% GST.
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Wellness Services: Salons, gyms, yoga, and fitness centres now taxed at 5% (down from 18%).
What Gets Costlier?
The rationalisation also brings sharper levies on luxury goods and lifestyle items:
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Beverages: Aerated drinks, caffeinated beverages, and all sugary soft drinks to attract a steep 40% GST.
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Vehicles: Luxury cars above 1,200cc, motorcycles above 350cc, yachts, and aircraft for personal use will attract 40% GST.
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Tobacco: Cigarettes, gutkha, and chewing tobacco continue with 28% GST plus cess, eventually moving to 40% GST.
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Leisure & Gaming: Casinos, online betting, race clubs, and IPL tickets will also fall under the 40% tax bracket.
Economic Impact
Officials said the restructuring aims to boost domestic consumption and cushion the economy from the adverse effects of US tariffs on Indian goods. By slashing rates on essentials and moderating levies on small cars, appliances, and cement, the government hopes to reduce inflationary pressures and spur growth, while ensuring luxury consumption bears a higher tax burden.
