NEWS

The Goods and Services Tax (GST) Council, in its marathon 56th meeting led by Finance Minister Nirmala Sitharaman, approved a next-generation GST reform package.

This marks a historic overhaul of the 8-year-old indirect tax regime, with a simplified two-slab structure of 5% and 18%, along with a 40% demerit rate for sin and luxury goods like tobacco and pan masala.

HIGHLIGHTS

Key Objectives

• Reduce tax burden on common people.
• Simplify GST slabs and remove classification disputes.
• Ease compliance through automated refunds and quick registration.
• Boost demand, support MSMEs, farmers, and middle-class households.

All new rates will take effect from September 22, 2025 (Navratri day).

Relief for Households – Everyday Items Become Cheaper

• Daily essentials: Hair oil, shampoo, soap, toothpaste, shaving cream now at 5% (earlier 18%).
• Food & kitchen products: Butter, cheese, namkeens, ghee, utensils, feeding bottles, baby diapers at 5% (earlier 12%).
• Education supplies: Maps, pencils, notebooks, erasers → Nil GST.

Healthcare Made Affordable

• Individual health & life insurance: Exempted from GST (Nil).
• Medical essentials: Oxygen, thermometers, diagnostic kits, glucometers, corrective spectacles → reduced to 5%.
• Aimed at making healthcare accessible and reducing family expenses.

Boost for Farmers & Agriculture

• Tractors, tyres, irrigation equipment, bio-pesticides: GST cut to 5%.
• Agri-machinery for soil preparation & harvesting: down to 5% (from 12%).
• This lowers input costs and supports farmers directly.

Automobiles Made Cheaper

• Small cars (petrol <1200cc, diesel <1500cc, length <4m): now at 18% (from 28%).
• 3-wheelers, motorcycles <350cc, goods vehicles: shifted to 18% (from 28%).
• Luxury cars & SUVs: Attract 40% demerit rate.
• Electric vehicles: Continue at 5%.

Relief on White Goods & Electronics

• ACs, TVs (above 32”), washing machines, projectors, monitors: brought down to 18% (from 28%).
• Expected to boost consumption demand.

Structural & Process Reforms

• Simplified registration: Automatic approval within 3 working days using data-based checks.
• Automated refunds: Faster provisional refunds through risk evaluation.
• Correction of inverted duty structure: Especially in textiles and fertilisers, ensuring smoother business operations.

Fiscal & Political Impact

• States flagged revenue concerns (Rs 80,000 crore – 1.5 lakh crore loss).
• Centre estimates net fiscal implication at Rs 48,000 crore, calling it “sustainable.”
• Reform achieved through consensus, no voting required.

Takeaway  

• GST 2.0 marks a shift from four slabs to two slabs (5% & 18%) + 40% demerit rate.
• Focus areas: affordability, agriculture, MSMEs, health, and education.
• Governance focus: ease of living, ease of doing business, compliance simplification.
• Seen as a landmark reform in India’s indirect tax regime.