Winning Bizness Desk
Mumbai.Finance Minister Nirmala Sitharaman announced that the latest reforms in Goods and Services Tax (GST) will bring an additional Rs 2 lakh crore into the Indian economy. She said that the changes will also leave more disposable income with ordinary citizens as many daily-use items will become cheaper. The new GST rates of 5 percent and 18 percent will come into effect from September 22.
Major relief in GST rate structure
Speaking at an event on Next Gen GST Reforms in Visakhapatnam, the Finance Minister said that the new tax structure will save people up to Rs 2 lakh crore, a big boost for the economy. She pointed out that 99 percent of items earlier taxed at 12 percent will now be under the 5 percent slab. Similarly, 90 percent of items that fell in the 28 percent slab will now be taxed at 18 percent.
Wider benefits for middle class households
Sitharaman explained that these reforms will give significant relief to the middle class and also help in reducing poverty. She said the benefit from GST reforms is ten times higher than the incentive amounts given to various industries. Essential items like milk, bread, paratha, paneer and several food products will now be exempt from GST. Health and life insurance policies for individuals will also not attract any GST.
Cheaper essentials and costlier luxury items
Under the new structure, GST will have only two slabs instead of four. Items of daily use such as soap, shampoo, air conditioners and cars will get cheaper under the 5 percent and 18 percent slabs. At the same time, luxury goods and tobacco products will see GST rise from 28 percent to 40 percent. This higher slab will include big cars and motorcycles with engines above 350 cc. The new 40 percent tax on tobacco goods, however, will not be implemented immediately.
Boost to revenue and tax base
The Finance Minister highlighted that GST revenue has grown steadily since its launch in 2017. She said that revenue collections have increased to Rs 22.08 lakh crore by 2025, and the taxpayer base has expanded from 65 lakh to 1.51 crore. This shows GST has not only increased revenue but also brought more people into the tax system.
Relief for hotels and personal services
Hotel bookings with tariffs up to Rs 7,500 a night will now attract only 5 percent GST instead of 12 percent. Similarly, services such as gyms, salons, barbershops and yoga centres will also see GST reduced from 18 percent to 5 percent. On the other hand, casino entries, race clubs and sports events like IPL tickets will now attract a higher GST of 40 percent, up from 28 percent.
Journey of GST since 2017 launch
GST was rolled out on July 1, 2017, replacing 17 central and state taxes and 13 cesses. Over seven years, the government has celebrated its success in unifying the tax structure. Initially, GST had four slabs of 5, 12, 18 and 28 percent. Now the government has simplified it into just two main slabs of 5 and 18 percent, aimed at making it more citizen-friendly. The goal, according to the Finance Ministry, is to provide relief to common people, support small businesses, and discourage harmful products like tobacco through higher taxation.
Story in a nutshell
- GST reforms to add Rs 2 lakh crore to economy
- New GST slabs will be 5 percent and 18 percent
- 99 percent of 12 percent items now at 5 percent
- 90 percent of 28 percent items shifted to 18 percent
- Essentials and health insurance made tax-free
- Hotels and personal services to become cheaper
- Luxury goods and tobacco to face 40 percent GST
