In a major move, the GST Council late Wednesday approved a complete overhaul of the tangled Goods and Services Tax regime, slashing rates on commonly used items ranging from hair oil and corn flakes to TVs, personal health, and life insurance policies.
(Representational Image)
In a major move, the GST Council late Wednesday approved a complete overhaul of the tangled Goods and Services Tax regime, slashing rates on commonly used items ranging from hair oil and corn flakes to TVs, personal health, and life insurance policies.
The Council approved the rate overhaul by limiting slabs to 5% and 18%, effective from September 22, the first day of Navaratri.
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Speaking after the 56th GST Council meeting, Union Finance Minister Nirmala Sitharaman said, “These reforms have been carried out with a focus on the common man. Every tax on the common man’s daily-use items has undergone a rigorous review, and in most cases, the rates have come down drastically. Labour-intensive industries have been given strong support. Farmers and the agriculture sector, as well as the health sector, will benefit. Key drivers of the economy will be given prominence.”
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Another key announcement was on individual health and life insurance, which are now exempt from GST. It comes as a big relief as the rate has been brought down from 18%.
Nirmala Sitharaman announced, “Insurance services from 18% currently will go into two, three different categories. Exemption of GST on all individual life insurance policies, whether term life, ULIP, or endowment policies, and reinsurance thereof, to make insurance affordable for the common man and increase the insurance coverage in the country.”
“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,” she added.
The panel also approved simplifying the tax structure from the current four slabs to a two-rate structure. Additionally, a special 40% slab is proposed for select items such as high-end cars, tobacco, and cigarettes.
Except for gutkha, tobacco and tobacco products, and cigarettes, the new rates for all products will be effective September 22.
Daily-use food items will continue to attract a nil tax rate. Common food and beverage items ranging from butter and ghee to dry fruits, condensed milk, sausages and meat, sugar-boiled confectionery, jams and fruit jellies, tender coconut water, namkeen, drinking water in 20-litre bottles, fruit pulp or juice, beverages containing milk, ice cream, pastries and biscuits, corn flakes, cereals, and sugar confectionery are likely to see a cut in the tax rate to 5% from the current 18%.
All forms of chapati and paratha will now attract nil tax, down from the currentrate of 5%.
Tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture, and combs will see a rate cut from 12% to 5%. The tax rate on cement will be reduced from 28% to 18%.
As per the announcement, rates on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap, and hair oil have been cut to 5% from 18%.
All petrol, LPG, and CNG vehicles with engines below 1,200 cc (petrol) or 1,500 cc (diesel) and not more than 4,000 mm in length will move to the 18% slab from the prevailing 28%.
While larger cars, above 1,200 cc for petrol and 1,500 cc for diesel, will be charged at 40%.
Motorcycles up to 350 cc, as well as consumer electronics such as air-conditioners, dishwashers, and TVs, will be taxed at a lower GST rate of 18%, compared to 28% earlier. Notably, EVs will continue to be taxed at 5%.
Industry welcomes move
Chandrajit Banerjee, Director General, CII, said, “The Council’s forward-looking decisions of moving to two rates of 5% and 18%, simplifying refunds and MSME procedures, and exempting individual life and health insurance from GST are pathbreaking. This clarity will ease compliance, reduce litigation, and give businesses and consumers the predictability they need.”
“By lowering rates on everyday items and critical inputs, the reforms provide immediate relief to families and strengthen the foundation for growth,” he added.
Hemant Jain, President, PHDCCI, said, “In agriculture, lowering GST on tractors, tyres, irrigation systems, and farm machinery to 5% will cut input costs and directly benefit farmers. Affordable access to healthcare—through nil GST on insurance, medical oxygen, and diagnostic kits—marks a socially progressive step, while reduced levies on education items will strengthen human capital.”
“These measures, as they simplify compliance, spur consumption, and ensure states gain from an expanded tax base—setting India firmly on the path of growth and inclusivity,” he added.
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