The proposal to eliminate the current four-rate structure and switch to dual rates of 5 per cent and 18 per cent was agreed by the Group of Ministers (GoM) on GST rate rationalisation on Thursday, August 22.
“This marks the first major step in implementing the next-generation GST reforms announced by Prime Minister Narendra Modi in his Independence Day address,” said Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.
The final decision on the recommendations will be taken by the GST Council in its next meeting, slated for September.
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After the approval, the 28 per cent slab will move to 18 per cent, and the 12 per cent slab will move to 5 per cent. Reducing the GST rate will decrease the prices of essential items and other items as well. Here’s a list of goods that may become cheaper and expensive after the implementation of revised GST rates.
Essential goods
A GST of 12 per cent is imposed on essential goods like medicines, processed food and non-alcoholic beverages, some dairy products. These all products may become cheaper after the revised GST rates. Other items like hotel rooms and some construction material also come under 12 per cent slab currently.
Air-conditioners, Refrigerators
Buying air-conditioners and refrigerators may also become cheaper now as the current GST rate is 28 per cent on these white items, which will come down to 18 per cent.
Four-wheelers
Four-wheelers with engine capacity less than 1,200 cc and two-wheelers up to 500 cc may become cheaper also as currently they all come under 28 per cent GST slab.
New GST slab
A new 40 per cent slab has been proposed. This includes sin goods – luxury goods, high-end cars, alcohol, gambling, soft drinks, drugs, fast food, coffee, sugar, and tobacco products, etc. These items may become expensive as currently they come under the highest tax slab of 28 per cent.
A sin tax is a special tax that the government puts on such goods. The purpose is to discourage people from using them and to reduce the harm they can cause.
The GoM also reviewed the Centre’s suggestion to exempt GST on individual health and life insurance premiums.
