Next-generation GST reforms

The 56th meeting of the Goods and Services Tax (GST) Council was held under the chairpersonship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The Council announced major rate changes aimed at providing relief to the common man, aspirational middle class, and facilitating trade, while tightening taxes on luxury and sin goods.

Towards a Two-Slab Structure

The Council’s recommendations pave the way for a broad two-slab GST structure of 5% and 18%, with a special demerit rate of 40% for super luxury, sin, and demerit goods.

Relief for Common-Use and Medical Items

Sweeping rate cuts were announced on several items of daily use:

• Reduced from 12% to 5%: fruit juices, butter, cheese, condensed milk, pasta, packaged coconut water, soya milk drinks, nuts, dates, sausages, medical-grade oxygen, gauze, bandages, diagnostic kits.
• Nil GST: ultra-high temperature (UHT) milk, chhena or paneer, pizza bread, khakra, plain chapati/roti, erasers.

Hike on Sin and Luxury Goods

The Council increased taxes on sin and luxury items under the special 40% GST slab. Items under this category include:

• Tobacco and Pan Masala products
• Cigarettes
• Automobiles above 1,200 cc (petrol) and 1,500 cc (diesel), and longer than 4,000 mm
• Motorcycles exceeding 350 cc
• Yachts, personal-use aircraft, and racing cars

Aerated Drinks Taxed Higher

The GST rate on aerated drinks with added sugar, caffeinated and non-alcoholic beverages has been increased sharply from 28% to 40%.