The Goods and Services Tax (GST) Council, in its 56th meeting which lasted over 10 hours Wednesday, cleared the next-generation reforms under the eight-year old indirect tax regime. This effectively paves the way for a broad two-slab structure of 5 per cent and 18 per cent with a demerit rate of 40 per cent rate only for super luxury, sin and demerit goods.
Union Finance Minister Nirmala Sitharaman made the announcement after the 56th GST Council meeting on Wednesday, calling it a step towards simplifying the tax system and boosting consumer confidence. Almost all personal use items will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs.
Lower tax burden on common people with sweeping rate cuts and reduction in GST slabs, ease blocked working capital, and facilitate ease of doing business with automated refunds and registration process.
All the rate changes, except those for tobacco and tobacco-related products, will come into effect from September 22, the first day of Navratri, said Union Finance Minister. From hair oil and corn flakes to televisions and household essentials, a wide range of commonly used products will now attract lower GST rates.
The government aims to encourage domestic spending and soften the impact of US tariffs on the Indian economy. Almost all personal-use goods will see reduced rates, with the only exceptions being gutkha, tobacco and cigarette products.
The Council has also exempted all individual life and health insurance premiums from GST. At present, these services attract an 18 per cent levy. The exemption will apply to all categories of life insurance policies such as term life, ULIPs, and endowment plans, along with their reinsurance.
Similarly, individual health insurance policies including family floaters and senior citizen covers will also fall under the zero GST bracket. The Finance Minister highlighted that the move would make insurance services more affordable and accessible for the common man, while encouraging wider penetration of coverage across the country.
Prime Minister Narendra Modi expressed happiness that the GST Council, comprising the Union and the States, had collectively agreed to the proposals submitted by the Union Government on GST rate cuts and reforms, which will benefit the common man, farmers, MSMEs, middle-class, women and youth.
“The wide ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” Modi said.
The GST Council announced sweeping rate cuts for common-use items ranging from packaged and branded food items like fruit juices, butter, cheese, condensed milk, pasta, packaged coconut water, soya milk drinks, nuts, dates and sausages, and medical items including medical grade oxygen, gauze, bandages, diagnostic kits (5 per cent from 12 percent) to nil GST rate for ultra-high temperature milk, chhena or paneer, pizza bread and khakra, plain chapati or roti and education item of erasers from 5 per cent at present.
