'GST Overhaul Will Positively Impact 140 Crore Indians': FM, Says 'Will Personally Monitor From...'

The Goods and Services Tax (GST) overhaul will have a positive impact on daily lives of all 140 crore Indians, Finance Minister Nirmala Sitharman told PTI on Saturday. She also expressed her confidence that the industry players will pass on GST rate cut benefits to customers and she would personally monitor the situation from September 22.

"I am very confident that industry will pass on GST rate cut benefits to consumers. I will personally monitor from September 22 price reduction of goods following GST rate cuts," Sitharaman told PTI. GST Council last week approved reduction of GST into two slabs of 5% and 18%.

The GST Council, in its 56th meeting, decided to overhaul the tax structure into a two-rate system as suggested by the Central government. Nirmala Sitharaman on Wednesday announced that these changes would be effective from September 22 for most items. However, tobacco and related products will transition to the new structure at a later date specified by her.

In addition to the two primary rates of 5% and 18%, a special rate of 40% will apply to sin goods like tobacco and luxury items such as large cars, yachts, and helicopters. The government estimates that the net fiscal impact of these rate reductions, based on consumption patterns in 2023-24, would be ₹48,000 crore. Officials noted that actual implications would depend on current consumption levels.

Impact on Common Goods
Sitharaman highlighted that these reforms focus on benefiting the common man. She stated that taxes on everyday items have been scrutinised thoroughly, resulting in reduced rates for many. Labour-intensive industries receive significant support, while sectors like agriculture and health are expected to benefit from these decisions.
Common-use items such as hair oil, soap, shampoo, toothbrushes, toothpaste, bicycles, tableware, and kitchenware will see their tax rates drop from either 18% or 12% to 5%. Additionally, namkeens, sauces, pasta, instant noodles, chocolates, coffee, and butter will also move to the 5% rate.

Changes in Tax Rates
Cement's tax rate will decrease from 28% to 18%. Ultra-high temperature milk, paneer, and all Indian bread types like rotis and chapatis will now have a zero percent tax rate instead of the previous 5%. Air-conditioners, TVs of all sizes, dishwashers, small cars with engines up to 350cc capacity will see their tax reduce from 28% to 18%.
Buses, trucks and ambulances along with all auto parts will attract an 18% GST rate. Furthermore, spectacles for vision correction will move from a 28% tax rate to just 5%. Thirty-three lifesaving drugs and medicines will also shift from a 12% tax rate down to zero percent.

Addressing Inverted Duty Structures
The long-standing inverted duty structure in the manmade textile sector is being addressed by reducing GST on manmade fibre from 18% to 5%, and manmade yarn from 12% to 5%. This change aims to resolve anomalies caused by duty inversion within this sector.

The inverted duty structure concerning fertilizers is also being corrected. The duty on sulphuric acid, nitric acid and ammonia is reduced from an earlier rate of 18% down to just 5%. These adjustments aim at rectifying discrepancies within these sectors.

Special Rate for Luxury Goods
A special rate of 40% applies exclusively to certain sin goods like pan masala and cigarettes as well as super-luxury items including mid-size or large cars exceeding engine capacities over350cc motorcycles helicopters airplanes yachts or other vessels intended for private use.

Insurance services such as individual life insurance policies along with individual health policies are set at zero percent instead of previously taxed at eighteen percent. Ms Sitharaman explained that while pan masala gutka cigarettes chewable unmanufactured tobacco bidi remain taxed at twenty-eight percent plus compensation cess once Centre repays loans borrowed compensating States these items shift forty percent slab likely repaid within calendar year.