GST Council’s Big Reform Push: Key Updates from the 56th Meeting

GST Rate Changes and Reforms: Highlights from the GST Council Meeting

1. GST Simplified to a Two-Slab Structure

• The earlier 12% and 28% slabs have been scrapped.
• India will now have only 5% and 18% GST rates.
• Items under the old 12% and 28% slabs have been reclassified under the new structure.

2. GST Exemption on Insurance Premiums

• Individual health policies
• Family floater plans
• Senior citizen health insurance

3. Introduction of a 40% “Sin & Luxury” Levy

• Pan masala
• Tobacco and cigarettes
• Sugary aerated drinks

4. Reduced GST on Everyday Essentials

• Personal care: soaps, shampoos, toothpaste
• Packaged foods: noodles, pasta, sauces, namkeens
• Dairy products: butter, ghee, UHT milk, paneer
• Staples: Indian breads and other basic foods → now at 0% GST in many cases

5. GST Relief for Automobiles and Appliances

• Small cars & motorcycles (≤300cc): reduced to 18% GST (from 28%)
• Appliances like ACs, TVs, dishwashers: down to 18%
• Auto parts: brought under a uniform 18% GST rate

6. Hospitality Sector Support

7. Relief on Footwear and Apparel

• Footwear and apparel priced up to ₹2,500 have seen major GST cuts.
• The earlier 12% and 28% slabs for these items are abolished.

8. Compliance Made Easier for Businesses

• GST registration within 3 working days for non-risky applicants
• Refunds processed within 7 days, benefitting exporters and SMEs
• Pre-filled GST return formats, reducing manual effort and errors

9. Implementation Timeline

What Gets Cheaper After GST Revamp?

Food & Beverages

• Nil GST: chapati, paranthas, pizza bread, khakra, paneer, UHT milk
• 5% GST (down from 18%): butter, ghee, dry fruits, condensed milk, sausages, jam, fruit jellies, confectionery, pastries, biscuits, ice cream, namkeen, cereals, beverages with milk
• Plant-based milk & soya milk drinks: 5% (down from 12–18%)

Household Items & Appliances

• 5% GST: tooth powder, feeding bottles, utensils, kitchenware, umbrellas, bicycles, bamboo furniture, combs
• Personal care (down from 18%): soaps, shampoos, toothpaste, toothbrushes, talcum powder, hair oil, face powder
• Appliances: ACs, dishwashers, TVs: 18% (down from 28%)

Stationery & Education

• Nil GST: maps, charts, pencils, sharpeners, crayons, exercise books, erasers
• Footwear & Textiles
• Footwear & textiles: 5% (down from 12%)

Healthcare & Insurance

• Nil GST: life & health insurance premiums
• 5% GST (down from 12–18%): thermometers, medical-grade oxygen, diagnostic kits, reagents, glucometers, corrective spectacles
• Life-saving drugs & devices: 5% or nil

Hospitality & Travel

• Hotels ≤ ₹7,500/night:  5% (without ITC)
• Economy flight tickets: 5%

Vehicles & Auto Components

• Motorcycles ≤ 350cc:18% (down from 28%)
• Small hybrid cars: reduced GST benefits
• Electric vehicles → remain at 5%
• Petrol, LPG & CNG cars (≤1200cc, ≤4000cc) → 18%
• Diesel cars (≤1500cc, ≤4000mm) → 18%
• Auto parts → 18% (down from 28%)

Construction & Infrastructure

• Cement:18% (down from 28%)
• Sewing machines & parts: 5% (down from 12%)

Agriculture & Fertilisers

• Tractors, soil machinery, irrigation equipment: 5% (down from 12%)
• Fertilizer inputs (sulphuric acid, nitric acid, ammonia): 5% (down from 18%)
• Biopesticides & micronutrients: 5% (down from 12–18%)
• Tractor components (tyres, pumps, gearboxes, radiators, etc.): 5% (down from 18%)

Wellness & Lifestyle Services

What Gets Costlier?

• Aerated & caffeinated drinks: 40% (up from 28%)
• Sugar-added or flavored beverages: 40% (up from 18–28%)
• Luxury vehicles: Cars >1200cc & >4000mm, motorcycles >350cc, yachts, aircrafts → 40% levy
• Tobacco & tobacco products: Continue at 28% + cess; will move to 40% later
• Leisure & Gaming: Casinos, gambling, race clubs, lottery, online gaming, IPL tickets → 40% GST.

What These GST Updates Mean for Businesses

• For consumers: lower household expenses on essentials, insurance relief, and cheaper travel & shopping.
• For businesses: simplified GST slabs, faster refunds, reduced compliance burdens, and potential demand revival across sectors like autos, FMCG, retail, and hospitality.
• For finance leaders: better cost optimization, need for quick system updates (ERP, billing software), and tighter monitoring of GST compliance in line with new rules.

Final Word