India has implemented a significant overhaul of its Goods and Services Tax regime, referred to as the next-generation GST or GST Bachat Utsav, that entered into force on Monday. The reform cuts taxes on some 370 items, ranging from every day needs to life-saving medicines.
Union Finance Minister Nirmala Sitharaman said that the new system is aimed at increasing consumer disposable income and giving a boost of about Rs 2 lakh crore to the economy.
According to the new structure, more than 50 products—such as UHT milk, khakhras, pre-packaged paneer, and breads like chapatis and parathas—will now be zero-tax products.
In the medical field, 33 life-saving drugs and therapies, including treatments for cancer and orphan diseases, have been exempted from GST, while the tax on most other drugs has been reduced from 12 per cent to nil. Medical devices, like glucometers and diagnostic kits, will now have a GST of only 5 per cent.
The revamp also eliminates GST on stationery for schools and offices such as pencils, erasers, notebooks, and maps. Prices of a host of consumer staples are likely to drop, including butter, biscuits, condensed milk, namkeen, jams, ketchup, juices, ghee, ice cream, and sausages.
Dry fruits and nuts like almonds, cashews, pistachios, and dates will be charged 5 per cent as against the previous 12 per cent. Cement used in residential construction has been brought down from 28 per cent to 18 per cent. Haircuts, salon services, yoga sessions, gyms, and health clubs will also face lower GST rates.
Toiletries such as soaps, shampoos, hair oil, face creams, and shaving creams are now exempt from the zero-GST slab. On the other hand, GST on kitchen appliances and electronics, including air conditioners, televisions, washing machines, and dishwashers, has been reduced from 28 per cent to 18 per cent.
To balance revenue loss, the government has subsumed the cess into the GST base and has levied a 40 per cent tax on luxury and sin products. Cigarettes, bidis, pan masala, gutka, and other tobacco products have the highest tax levied, followed by soft drinks such as Coca-Cola, Pepsi, and Fanta.
Luxury cars are also impacted: big SUVs and multi-purpose vehicles with petrol motors over 1,200 cc or diesel motors over 1,500 cc and longer than 4 meters will now be charged at 40 per cent, as opposed to the earlier tax of 28 per cent plus 22 per cent cess.
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