Two-tier GST tax structure to kick in from September 22

The GST Council on Wednesday approved a simpler two-tier tax structure with rates of 5% and 18%, effective September 22. The decision was reached at the Council's marathon 56th meeting, which lasted more than ten hours.

After the 56th GST Council meeting, Finance Minister Nirmala Sitharaman announced that there would be only two slabs and that compensation cess issues would be addressed.

“These reforms have been carried out with a focus on the common man. Every tax on the common man's daily use items has gone through a rigorous review and in most cases the rates have come down drastically. Labour-intensive industries have been given good support. Farmers and the agriculture sector, as well as the health sector, will benefit. Key drivers of the economy will be given prominence," Sitharaman added, TNIE reported.

Updated GST Rates

Milk and Dairy Products:

UHT milk: 0% (tax-free; earlier 5%) Condensed milk, butter, ghee, paneer, cheese: 5% or nil (earlier 12%)

Staple Foods:

Malt, starches, pasta, cornflakes, biscuits, chocolates, cocoa products: 5% (earlier 12-18%)

Dry Fruits and Nuts:

Almonds, pistachios, hazelnuts, cashews, dates: 5% (earlier 12%)

Sugar and Confectionery:

Refined sugar, sugar syrups, toffees, candy: 5% (earlier higher slab)

Other Packaged Foods:

Vegetable oils, animal fats, edible spreads, sausages, meat preparations, fish products, malt extract-based foods: 5%

Namkeens and Similar Edible Preparations:

Namkeens, bhujia, mixture, chabena (pre-packaged and labelled, except roasted gram): 5% (earlier 18%)

Water:

Natural/artificial mineral water, aerated waters (no added sugar or flavouring): 5% (earlier 18%)

Fertilisers: Fertilisers: 5% (earlier 12% or 18%)

Select Agricultural Inputs:Seeds and crop nutrients: 5% (earlier 12%)

Life-Saving Drugs, Health Products, Medical Devices From 12%/18% to 5% or nil

Electrical Appliances (Entry-level, Mass-use): From 28% to 18%

Footwear and Textiles (Mass-market): From 12% to 5%

Items remaining under higher taxation

Pan masala, gutkha, cigarettes, chewing tobacco, zarda, unmanufactured tobacco, bidi: Remain at existing high GST rates plus compensation cess.

Goods (including aerated waters) with added sugar or sweeteners/flavouring: From 28% to 40%.

Sin and luxury goods (cigarettes, premium liquor, high-end cars) at 40%.

Imported armoured luxury sedans

Other Notable Changes

GST exempted on: Ultra-High Temperature (UHT) milk

Prepackaged and labelled chena/paneer

All Indian breads (chapati, roti, paratha, parotta, etc.)

GST is exempt on all individual life insurance policies (term life, ULIP, endowment) and reinsurance.

Valuation method for pan masala, tobacco products changed from transaction value to Retail Sale Price (RSP).

Prime Minister Narendra Modi praised the action, reiterating his Independence Day promise of next-generation GST reforms.

In a post on X, the Prime Minister stated, "Glad to state that the GST Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts and reforms, which will benefit the common man, farmers, MSMEs, middle-class, women and youth".

He went on to say that the comprehensive reforms will improve the lives of our citizens and make conducting business easier for everyone, particularly small traders and businesses.