In a major simplification of the GST structure, the government has overhauled the previously complex tax slabs that had long burdened small traders since the rollout of the flagship tax reform. Effective from September 22, the new framework will retain only two primary slabs — 5℅ and 18%.
For the average consumer, this translates to higher disposable income, which the government anticipates will flow back into the economy, providing a significant stimulus. The move is expected to have a revenue impact of ₹48,000 crore.
“These reforms have a multi-sectoral and multi-dimensional approach, designed to promote ease of living for citizens and ease of doing business for enterprises,” said Union Finance Minister Nirmala Sitharaman following the GST Council meeting.
Key Highlights of the New GST Structure:
• Major tax reductions have been applied to food items, essential medicines, farm equipment, green energy products, and entry-level vehicles.
• Life and health insurance policies — including family floaters — and 33 critical life-saving drugs, such as anti-cancer medications, previously taxed at 12%, will now be entirely tax-exempt.
• Widely used medical devices like thermometers and glucometers have been brought under the 5% tax bracket.
• Consumer durables such as TVs, air conditioners, and motorbikes under 350cc will now attract 18% GST, down from the earlier 28%, making them significantly more affordable.
• Small cars — petrol vehicles up to 1200cc and diesel up to 1500cc — will also fall under the 18% slab, while larger vehicles and high-end models will continue to be taxed at 28%.
• Luxury items and sin goods have seen a substantial hike, with a 40% sin tax imposed on products like tobacco, carbonated drinks, mid- to large-sized vehicles, and motorbikes above 350cc
• Everyday essentials such as hair oil, shampoo, soap, dairy products, pasta, sauces, and snacks will now be taxed at 5%, while bread, milk, and paneer will remain exempt.
• Relief has also been extended to the agriculture sector, with GST on farming tools reduced from 12% to 5%.
• In the education sector, affordability has been enhanced through zero tax on school supplies such as exercise books, notebooks, pencils, erasers, and crayons.
With its sweeping changes, the revamped GST structure aims not only to simplify taxation but also to foster inclusive growth by making everyday essentials and critical services more accessible to all.
