GST council Announces Broad Tax Cuts on Consumer Goods, Effective September 22nd
New Delhi: The Goods and Services Tax (GST) Council on Wednesday approved a significant restructuring of India’s indirect tax system, resulting in lower prices for a wide range of consumer goods including televisions, small cars, and everyday items like toothpaste and shampoo. the changes, aimed at stimulating consumption and boosting economic growth, will take effect on September 22nd.
This overhaul represents the most ambitious reform of the GST as its introduction by the Modi government in its first term, seeking to create a unified national market.With growing concerns about weakening demand and uncertainties impacting export-focused sectors,boosting domestic consumption has become a key priority.After a ten-hour meeting, Union and state governments agreed to the tax reforms, which will impact sectors including textiles, agriculture, fertilizers, construction, transport, renewable energy, handicrafts, and insurance. The Council decided to consolidate the GST rate structure, eliminating the 12% and 28% slabs.Most goods and services currently taxed at 12% will be moved to the 5% slab, while those in the 28% bracket will largely shift to 18%.
Specific changes include exemptions for health insurance premiums paid by individuals. Additionally, approximately 50 products currently in the 12% GST bracket - such as condensed milk, cheese, dried fruits, and preserved vegetables – will see their tax rate reduced to 5%. around 25 items currently taxed at 18%, including chocolates, ice cream, cakes, and corn flakes, will also move to the 5% slab.
While the rate restructure received unanimous endorsement from state finance ministers, concerns were raised regarding potential short-term revenue losses. Discussions on compensating states for these losses are ongoing.
“states endorsed this decision unanimously as this is in national interest,” stated Uttar Pradesh finance minister Suresh Khanna following the meeting.