The NDA government led by Narendra Modi at the centre delivered a new tax bonanza, which is going to come into effect from September 22nd. In a major relief to crores of middle-class families across the country, the GST council headed by Finance Minister Nirmala Sitharaman on Wednesday announced sweeping changes to the existing tax structure by abolishing the 12 per cent and 28 per cent slabs. The welcome decision comes amid growing demands from all quarters for revision of the existing GST rates and also to bring daily essentials under a relatively low tax percentage.
In the restructured tax reform, major chunk of items including milk, panner, snacks and Indian breads will become cheaper as they will now exempted from GST. Earlier, they were taxed at 5%. Packaged foods like Namkeen, Bhujiya, Sauces, Pasta, Cornflakes, Butter and Ghee will come down from existing 18% to 5 %. Other essentials like Hair Oil, Toilet soaps, Shampoos, Toothbrushes, Bicycles etc also fall under the same 5% category from now onwards.
The biggest takeaway from the revamped GST tax regime is that Healthcare will be more affordable in India as the council has exempted on 33 life saving medicines, which earlier were taxed at 12%. The individual life and insurance policies will see a reduction in the premium prices because the existing 18% GST has also been abolished.
Household items like tooth powder, tableware, kitchenware, umbrella, utensils, bamboos, furniture and combs have now been brought under the 5% tax bracket instead of the existing 18%. The revised GST will have a noticeable impact on the construction costs as well because cement prices will be reduced due to tax reduction from 28% to 18%.
Coming to automobile industry, smaller vehicles, including petrol, LPG and CNG variants under 1200 cc and 4000 mm length, along with diesel vehicles up to 1500 cc and 4000 mm length will also see a fall in prices as the tax rate was slashed by 10% from the existing 28% to 18%. Electrical vehicles will continue to invite tax at 5% as earlier.
The GST overhaul has made sure that items like pan masala, cigarettes, gutka, beedi and other tobacco products will be continued be taxed under the existing 28% until all pending loans and compensation payments are cleared. Thereafter, they will be moved to 40% slab.
Additionally, all types of aerated water, carbonated beverages, caffeinated drinks and non alcoholic beverages will be taxed at 40% under a special high tax slab introduced in the new system. Motorcycles with an engine capacity above 350cc and helicopters and yachts will also fall in this new category from now.
After announcing a new income tax regime earlier this year, the restructuring of GST comes as huge relief for different sectors of the country. By creating a higher tax slab for luxury and sin goods while reducing rates on essentials, healthcare and housing, the NDA government has delivered a festival gift ahead of the Dussehra and Diwali festivities.