GST New Rates: Major GST Overhaul! See the Full List of Items Getting Cheaper from Sept 22

GST New Rates: The Government of India has introduced a major reform in the Goods and Services Tax (GST) system, which is set to have a significant impact on the lives of ordinary people. In this new system, effective from September 22nd, the old four-tier structure has been replaced by a new two-tier system. This change will reduce the prices of many essential goods while increasing the cost of some luxury and demerit products. Let’s delve into the details of this new GST framework.

The New GST Framework: What Has Changed?

In the new system, the four GST slabs (5%, 12%, 18%, 28%) have been revised to two main slabs – 5% and 18%. Additionally, a special 40% slab has been introduced for super-luxury and certain demerit goods. The primary objective of this move is to simplify the tax structure, reduce tax-related disputes, and boost the economy by increasing the purchasing power of the general public.

Which Items Are Getting Cheaper?

This new regulation is poised to lower the prices of many essential products for the middle class and the general population.

• Household Essentials: Everyday items like soap, shampoo, toothpaste, and hair oil have moved from the 12% to the 5% GST slab, making them more affordable.
• Electronics: Products such as air conditioners (ACs) and televisions (TVs), which were previously taxed at 28%, will now attract an 18% GST. This will significantly reduce the cost of purchasing these goods.
• Health and Insurance: Life and health insurance premiums have been made completely exempt from GST. Additionally, the GST on medical equipment has been reduced from 18% to 5%.
• Hospitality and Services: For hotels with tariffs below ₹7,500 per night, the GST will be reduced from 12% to 5%. Services like gyms and salons will also see their tax rate drop from 18% to 5%.
• Automobiles: Small cars (under 1200cc for petrol and 1500cc for diesel) and motorcycles under 350cc will now be taxed at 18% instead of 28%. Buses, trucks, and auto parts will also be taxed at 18%.

Which Items Are Getting More Expensive?

In the new structure, the tax burden has been increased on certain products, primarily those considered luxury or harmful to health.

• Demerit Goods: Harmful products like tobacco, pan masala, gutkha, and sugary caffeinated beverages will attract a 40% GST along with an additional compensation cess.
• Luxury Vehicles: Large cars with engines over 1500cc and SUVs longer than 4 meters will now fall under the 40% GST slab.
• Gambling and Casinos: The tax rate on betting, casinos, and online money games has been increased from 28% to 40%.

What Will Be the Impact on the Economy?

According to the government, this change will leave more disposable income in the hands of the people, which will, in turn, increase market demand and create new jobs. Although the government may face a revenue loss of about 16 to 20 billion dollars due to these tax cuts, it is hoped that the simplified tax system will encourage more people to pay taxes, and the economic momentum will compensate for this loss.

Impact on Businesses

Businesses will need to update their systems and product pricing according to the new GST rates by September 22nd. The government is also introducing administrative reforms under “GST 2.0,” such as simplifying the registration process and providing faster refunds, which will be beneficial for traders.