New GST rates will come into effect from Sept. 22

New Delhi: The Goods and Services Tax (GST) Council yesterday approved a complete overhaul of India’s tax consumption tax since its launch in 2017, slashing duties on household essentials, medicines, small cars and appliances and affecting everything from toothpaste and insurance to tractors and cement. The Council approved the rate overhaul by limiting slabs to 5% and 18%, as the Centre seeks to boost domestic spending and cushion the economic blow of the US tariffs imposed on Indian goods.

The Council reduced the current four slabs — 5%, 12%, 18% and 28% — to the two-rate structure of 5% and 18%.  A special 40% slab is, however, proposed for a select few items such as high-end cars, tobacco and cigarettes.

The new rates for all products, except pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and beedi, will be effective from Sept. 22.

Prime Minister Narendra Modi said that the wide-ranging reforms will benefit the common man, farmers, MSMEs, middle-class, women and youth.

He described the move as one that would benefit farmers, MSMEs, the middle class, women and youth. In a post on social media platform X, he called it a step towards next-generation GST reforms. “During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST. The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and strengthening the economy,” PM Modi said.

What gets costlier?

Aerated, caffeinated drinks

1. Popular soft drinks like Coca-Cola & Pepsi, and other non-alcoholic beverages, will become costlier, with the Council approving a hike in tax rate on carbonated beverages to 40% from 28%.

2. Caffeinated beverages to be charged at 40% from 28%.

3. Other non-alcoholic beverages will also become costlier, as the GST rate on these items has been increased to 40% from 18%.

4. All goods (including aerated waters) with added sugar or other sweetening matter or flavoured are to be taxed at 40% from 28%.

Vehicles

1. All automobiles above 1,200 cc and longer than 4,000 mm, as well as motorcycles above 350 cc, yachts and aircraft for personal use, and racing cars will attract a 40% levy.

Tobacco items

1. Tobacco and tobacco-related products will continue to be subject to a 28% GST rate plus a compensation Cess till the time the loans taken to compensate States for loss in revenue during the COVID-19 pandemic are repaid. Once that ends, tobacco and tobacco-related products will be subject to a 40% GST rate.

Leisure activities

1. The 40% tax will also be levied on services by a race club, leasing or rental services, and casinos/gambling/horse racing/lottery/online money gaming.

What gets cheaper?

Food and beverage

1. All forms of chapati and paranthas will be charged nil tax, down from 5%.

2. Tax rate has also been slashed to nil from 5% on ultra-high temperature milk, chena or paneer, pizza bread and khakra.

3.  Common use food items 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, with a cut in tax rate to 5% from the current 18%.

4. GST on other fats and cheese has also been reduced to 5% from 12%.

5.  Plant-based milk drinks will become cheaper with the GST rate being reduced to 5% from 18% earlier, while that of soya milk drinks has also been cut to 5% from 12%.

Household items

1. Items such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see a rate cut from 12% to 5%.

2. Shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil, with a cut down to 5% from 18%.

Household appliances

1. Consumer electronics like ACs, dishwashers and TVs will be taxed at 18% from 28%.

Stationary items

1. Maps, charts, globes, pencils, sharpeners, crayons and pastels, exercise books, and notebooks will be charged at nil from 12%.

2. Erasers will be charged at nil from 5%.

Footwear and textiles

1. Footwear and textiles have seen GST cut from 12% to 5%.

Healthcare

1. Life-saving drugs, health-related products, and some medical devices have seen rate cuts from 12% /18% to 5% or nil.

2. The rate on thermometers has been slashed from 18% to 5%, on medical grade oxygen, all diagnostic kits and reagents, glucometers and test strips and corrective spectacles from 12% to 5%.

Insurance and policies

1. Individual life and health insurance policies to attract nil tax.

2. Supply of service of third-party insurance of goods carriage will now attract 5% with Input Tax Credit (ITC) from 12% with ITC.

Hotel tariffs and flights

1. The GST has been lowered from 12% with ITC to 5% without ITC. The tax on rooms up to Rs. 7,500 has been reduced to 5%.

2. Economy class tickets to attract just 5% GST.

Vehicles, auto components

1. Motorcycles up to 350 cc will be taxed at 18%, as against 28% currently.

2. Small hybrid cars will also benefit, while EVs will continue to be charged at 5%.

3. GST on auto components has been reduced to 18% from the current 28% slab.

Fuel usage

1. 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% rate from 28%.

Construction

1. Cement will cost less with the tax rate coming down from 28% to 18%.

Sewing machines and parts

1. GST rate has been slashed from 12% to 5%

Agricultural machinery

1. The rate has been slashed from 12% to 5% on fixed speed diesel engines of power not exceeding 15HP, hand pumps, nozzles for drip irrigation equipment and sprinklers, agricultural and horticultural machinery for soil preparation, harvesting & threshing machinery, composting machines and tractors (except road tractors for semi-trailers of engine capacity more than 1800 cc).

2. The rate will also apply to self-loading agricultural trailers and hand-propelled vehicles like hand carts.

3. GST on key fertiliser inputs, including sulphuric acid, nitric acid and ammonia, has been reduced from 18% to 5%.

4. Various biopesticides including Bacillus thuringiensis variants, Trichoderma viride, Trichoderma harzianum, Pseudomonas fluoresens, Beauveria bassiana, NPV of Helicoverpa armigera, NPV of Spodoptera litura, neem-based pesticides and Cymbopogan to get cheaper as GST has been reduced from 12% to 5%.

5. GST reduced to 5% on micro-nutrients covered under Fertiliser Control Order, 1985.

6. Comprehensive tractor components, including rear tractor tyres and tubes, agricultural diesel engines of cylinder capacity exceeding 250 cc for tractors, hydraulic pumps for tractors, and various tractor parts such as rear wheel rim, centre housing, transmission housing, front axle support, bumpers, brake assembly, gear boxes, trans-axles, radiator assembly and cooling system parts, to get cheaper with a reduction from 18%  to 5%.

Beauty and physical well-being services

1. Services of health clubs, salons, barbers, fitness centres, yoga, etc., will attract a GST rate of 5% without ITC. These services attracted 18% GST earlier.