New GST Rate Structure | What Gets Cheaper, What Costs More

The Goods and Services Tax (GST) Council has introduced a significant change in the country’s indirect tax system. Starting September 22, the previous system consisting of four slabs – 5%, 12%, 18% and 28% – will be eliminated. Instead, consumers will confront a much less convoluted tax structure based on just two standard slabs – 5% and 18%.

Additionally, a special slab of 40% will be introduced to treat sinful and luxury goods differently, while many basic commodities will be kept entirely outside the purview of GST. This initiative aims to alleviate the burden on lower- and middle-income consumers and is expected to decrease prices on a wide range of daily-use items.

0% GST Category

The Council has exempted several essential goods:

• Stationery products such as exercise books, notebooks, pencils, erasers, sharpeners, crayons, maps, charts, and globes.

• Food items like Ultra-High Temperature (UHT) processed milk.

• Healthcare: 33 life-saving medicines, for example, Asciminib, Mepolizumab, Daratumumab, Teclistamab, Amivantamab, and Alectinib.

5% GST Placement

Now, 5% GST will be applicable on fast-moving goods and packaged food items. They are as follows:

• Dairy & Food: butter, ghee, cheese, condensed milk, spreads, dry fruits (almonds, pistachios, brazil nuts, figs, dried mangoes, dates), citrus fruits.

• Packaged Food: pasta, noodles, cornflakes, cakes, pastries.

• Health Care items: thermometer, diagnostic kits, medical oxygen, glucometers, strips.

• Personal Care: hair oil, shampoo, toothpaste, shaving cream, face powder.

• Others: bidi wrapper leaves, Indian katha, crude glycerol, lard oil, vegetable waxes.

18% GST Placement

A large segment of goods and vehicles will now be placed into an 18% category. They include:

• Automobiles: both petrol & CNG cars (up to 1200cc / 4000mm), diesel cars (up to 1500cc / 4000mm), hybrids in the category, 3 wheelers, motorcycles (up to 350cc), transport vehicles;

• Electronics & appliances: air conditioners, projectors, monitors, TVs larger than 32 inches, which previously were at 28% GST.

40% GST Category (Luxury & Sin Goods)

This new slab of taxation specific to luxury or ‘sin’ products includes:

• Tobacco and tobacco-related products: cigarettes, cigar tobacco, chewing tobacco, and vapes

• Pan masala and sweetened soda

• Luxury vehicles: Any petrol vehicle above 1200 cc, any diesel vehicle above 1500 cc, motorcycles above 350 cc

• Ultra-luxury products: yachts, private jets, personal aircraft

With this reform, everyday goods will now be cheaper, from toothpaste and scrubs to thermometers, and unreasonable taxes will apply to high-end goods and sin products. The entire plan is a simplified GST that acknowledges everyday households while taxing excesses in consumption on luxury-related goods.