New Delhi: The Goods and Services Tax (GST) Council, in its marathon 56th meeting on Wednesday that stretched over 10.5 hours, approved a major rationalisation of the tax structure, introducing a simplified two-tier rate system of 5% and 18%, effective from September 22.
Finance Minister Nirmala Sitharaman, briefing the media after the meeting, said the restructuring aimed to focus on the “main drivers of the economy” while ensuring relief to consumers and businesses.
Among the big takeaways:
- Television sets will now attract an 18% GST rate.
- Life-saving cancer drugs have been moved to the nil tax slab, providing significant relief to patients.
- The inverted duty structure problem has been corrected, making compliance easier for businesses.
- Sin goods, including cigarettes and paan masala, will face the highest rate of 40%.
- The compensation cess on tobacco and related products will continue “till we repay the loan,” Sitharaman clarified.
Consensus-based decision
Bihar Deputy Chief Minister Samrat Choudhary stressed that the decision was taken with complete consensus. “All states were on board for the rationalisation exercise,” he said.
Revenue implications
According to Revenue Secretary Arvind Shrivastava, the tax restructuring is expected to have a revenue implication of nearly ₹48,000 crore. He expressed confidence that the move would be fiscally sustainable, adding that revenue buoyancy was expected to balance the system.
Pending decisions
Uttar Pradesh Finance Minister Suresh Khanna noted that no final call had yet been made on whether to impose an additional levy on demerit goods beyond the existing 40% ceiling.
Key GST Rate Changes at a Glance:
- Nil tax (reduced from 5%): Paneer, Indian breads such as chapati, roti, and paratha.
- 5% (down from 12–18%): Namkeen, sauces, pasta, chocolate, butter, ghee.
- 18% tax rate: All auto parts, three-wheelers, and all categories of television sets.
