The 56th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman, has approved a major restructuring of India’s goods and services tax regime. The decision, taken on Wednesday, abolishes the 12% and 28% tax slabs and introduces a simpler structure with two primary slabs 5% and 18% along with a new 40% rate for sin and luxury goods.
The revised tax structure will come into force from September 22, marking the start of Navaratri.
“These reforms have been undertaken keeping the common man at the centre. Taxes on essential daily-use items have been thoroughly reviewed and, in most cases, reduced. Labour-intensive industries, agriculture and healthcare will gain significantly, and we have ensured that priority sectors of the economy receive due attention,” Sitharaman said after the meeting.
What Gets Cheaper?
The rate changes will provide relief across a wide basket of goods:
- 175 items of daily use including milk, paneer, bread, and snacks will become more affordable.
- Everyday essentials like hair oil, soaps, shampoos, toothbrushes, tableware, and kitchenware will now fall under the 5% slab.
- UHT milk, paneer, chenna, and Indian breads such as parathas will move from 5% to nil tax.
- Spectacles will now be taxed at 5%.
Among the major shifts:
- Almost 99% of items under the 12% slab including fertilisers, handicrafts, natural menthol, marble and granite blocks will now move to 5%.
- 33 life-saving medicines, including cancer drugs, will be exempt from GST altogether.
From 28% to 18%: Big-Ticket Items
A large share of products previously taxed at 28% will now fall into the 18% bracket:
- Air conditioners, TVs, and washing machines
- Cement, motorcycles below 300 cc, and small cars up to 350 cc
- Auto parts, trucks, buses, and ambulances
All televisions, regardless of size, will now attract 18% GST, down from the earlier 28% on models above 32 inches.
Fixing Duty Anomalies
The Council also addressed the inverted duty structure by lowering taxes on:
- Man-made fibre – from 18% to 5%
- Man-made yarn – from 12% to 5%
40% Slab Introduced for Sin & Luxury Goods
The new 40% GST slab will apply to:
- Paan masala, tobacco, bidis, cigarettes
- Aerated, carbonated and caffeinated beverages
- Luxury products such as motorcycles exceeding 350 cc, yachts, and helicopters
Additionally, GST on paan masala and tobacco will now be imposed on the retail sale price (RSP) rather than the wholesale value, ensuring higher revenue collection.
Political Endorsement
Prime Minister Narendra Modi lauded the move, recalling his Independence Day pledge of next-generation tax reforms.
“The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and reforms aimed at easing living conditions for citizens and boosting economic growth. I am glad the GST Council has collectively endorsed these steps which will directly benefit farmers, MSMEs, the middle class, women, and youth, while also improving ease of doing business for small traders,” Modi said in a post on X.