GST Council okays tax cuts on TVs, small cars, and a host of consumer goods; new rates from 22 September

Taxes on a host of products from toothpaste and shampoo to dish washers, television sets and small cars are set to come down, with the Goods and Services Tax (GST) Council on Wednesday approving a massive restructure of the indirect tax system meant to stimulate consumption demand and boost economic growth, state finance ministers said.

The new rates will be effective from 22 September, ministers said.

This marks the most ambitious reform of GST, the single national tax that Prime Minister Narendra Modi’s NDA government rolled out in his first term seeking to unify the vast Indian market. Giving a strong boost to domestic consumption has become a priority for Modi, with tariff-related uncertainties threatening order books of businesses in several export focused sectors.

At the end of a marathon meeting lasting over 10 hours on Wednesday, Union and state governments cleared the tax reform that will lower prices of products in textiles, agriculture, fertilizers, construction, transport, renewable energy, handicrafts and insurance sectors and boost the demand for goods and services.

At the meeting, state finance ministers from non-BJP states expressed their concerns around short-term revenue loss arising from the tax rate restructure.

As per the rate restructure, the 12% and 28% slabs will be done away with and most of the goods and services in these slabs will be moved to 5% and to 18% respectively.

At the meeting, no conclusive decision is taken on compensating states for their revenue loss, as has been demanded by states. “States endorsed this decision unanimously as this is in national interest,” said Uttar Pradesh finance minister Suresh Khanna.

Health insurance premiums paid by individuals will be exempted from GST. Close to 50 products in the 12% slab including condensed milk, cheese, dried fruits and preserved fish and vegetables will be moved to 5%; close to 25 items including chocolates, ice cream, cakes and corn flakes in the 18% slab will be moved to 5%.