Next-generation GST reforms! Taxes slashed on common use items | Highlights

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New Delhi: The 56th meeting of the GST Council, held under the chairpersonship of Union Finance & Corporate Affairs Minister Nirmala Sitharaman on Wednesday recommended the changes in GST tax rates, saying it would immensely help the common man, aspirational middle class and measures for facilitation of trade in GST.

The recommendations made by the 56th GST Council has paved the way for a sweeping reforms of India’s indirect tax structure. The changes will come into effect from September 22. Numerous daily-use goods will become cheaper, however, products like tobacco and goods under the ‘sin’ category will continue to attract higher tax.

GST Council Meeting announcements

  1. The GST Council headed by Sitharaman gave the green signal to the reforms to improve the lives of all citizens and ensure ease of doing business for all, including small traders and businessmen.
  2. To make insurance affordable for everyone and increase the insurance coverage in the country, GST has been exempted on all individual life insurance policies whether term life, ULIP or endowment policies and reinsurance thereof .
  3. “Exemption of GST on all individual health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage in the country,” the official release mentioned.
  4. The GST Council approved the two rate structure – with a Standard Rate of 18% and a Merit Rate of 5%. A special de-merit rate of 40% for a select few goods and services has been decided.
  5. Essential items including, shampoos, toothbrushes, hair oil, toilet soap bars, toothpaste, kitchenware, Bicycles, Tableware, and other household articles, etc will attract only 5 per cent GST. Earlier, it was 18% or 12%.
  6. No GST will be levied on Ultra-High Temperature (UHT) milk, Prepackaged and labelled chena or paneer. Earlier, 5% tax was imposed on the mentioned products.
  7. All the Indian Breads have been exempted from GST. Chapati or roti, paratha, parotta, etc will attract Zero tax.
  8. 5% GST will be imposed on Cornflakes, Butter, Preserved Meat, Ghee, Sauces, Pasta, Instant Noodles, packaged namkeens, Bhujia, Chocolates, Coffee, etc. Earlier, it was 12% OR 18%.
  9. Air-conditioning machines, TVs, Dishwashing machines, Small cars, Motorcycles equal to or less than 350 CC will attract only 18 per cent GST.
  10. “Agricultural goods, such as tractors, agricultural, horticultural or forestry machinery for soil preparation or cultivation, harvesting or threshing machinery, including straw or fodder balers, grass or hay mowers, composting machines etc will attract 5 percent GST,” the release stated.
  11. Labour intensive goods such as granite blocks, Marble, travertine blocks, Handicrafts, and Intermediate leather goods will attract only 5 per cent tax.
  12. 18 percent GST will be levied on Cement, while it was 28%.
  13. Importantly, the GST Council decided to eliminate GST on 33 lifesaving drugs and medicines. It also 5% to NIL on 3 lifesaving drugs & medicines used for treatment of cancer, rare diseases and other severe chronic diseases.
  14. Reduction of GST on all other drugs and medicines from 12% to 5%.
  15. The medical apparatus and devices used for medical, dental, surgical, or veterinary usage for physical or chemical analysis will attract 5 percent GST. Earlier, it was 18 per cent.
  16. Medical equipment and supplies devices such as diagnostic kits, reagents, blood glucose monitoring system (Glucometer) medical devices, wadding gauze, bandages, etc will attract 5 tax. 
  17. Small Cars and Motorcycles equal to or below 350cc will be charged 18 per cent, while earlier it was 28 per cent.
  18. The Council also decided to reduce GST from 28% to 18% on buses, trucks, ambulances etc.
  19. All auto parts irrespective of their HS code will attract Uniform rate of 18%.
  20. “Correction of long-pending inverted duty structure for the manmade textile sector by reducing GST rate on manmade fibre from 18% to 5% and manmade yarn from 12% to 5%,” the release stated.
  21. Fertiliser sector to benefit due to “correction of inverted duty structure in fertilizer sector by reducing GST from 18% to 5% on Sulphuric acid, Nitric acid and Ammonia”.
  22. Renewable energy devices and parts for their manufacture will have 5 per cent GST
  23. “Hotel Accommodation” services with a value less than or equal to Rs 7,500 per unit per day or equivalent will attract only 5%.
  24. The Beauty and physical well-being services – gyms, salons, barbers, yoga centres, etc will be charged 5 per cent GST. Earlier, it was 18 percent.