GST Rates Overhaul: Relief For Essentials, Heavier Tax On Luxury — Key Highlights

The 56th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman in New Delhi on Wednesday, unveiled a sweeping overhaul of tax rates aimed at easing costs for households while tightening levies on sin and luxury goods.

Essentials such as milk, paneer, butter and life-saving medicines have been granted steep GST cuts or exemptions, while tobacco products, aerated drinks, luxury cars and yachts will attract higher taxes of up to 40%. The changes will take effect from Sept. 22, with phased implementation for certain items.

Here are the key highlights from the meeting:

The GST council has also approved a two-tier rate structure of 5% and 18%, replacing the existing four major slabs — 5%, 12%, 18%, and 28%.

"We are simplifying registration, return filing and refunds. We are making reforms with a focus on the common man," said Sitharaman during the press briefing.

• UHT milk, paneer, pizza bread, khakhra, chapati, roti — exempt from GST.

• Butter, cheese, condensed milk, ghee, nuts, dates — reduced from 12% to 5%.

• Wide range of food products like pasta, jams, sauces, pickles, juices, biscuits has been cut to 5%.

• The GST on diagnostic kits, life-saving medicines, oxygen, surgical items has been reduced to 5% or Nil.

• Renewable energy equipment, agri-machinery, handicrafts, footwear up to Rs 2,500, toys, paper products – down to 5%.

• GST on air conditioners, all TVs, dishwashers, small cars, and motorcycles below 350 cc will reduce from 28% to 18%.

• GST on cement reduced to 18%.

• GST on small electric cars, electric SUVs and luxury electric cars to remain at 5%.

• The GST on masala, gutkha, cigarettes, tobacco products has been hiked to 40%, while the tax of bidis has been reduced to 18%. However, GST on tobacco and pan masala to be levied on Retail Sale Price.

• The government also clarified that tobacco and pan masala products to remain at current rates until cess loan obligations are cleared.

• Aerated and caffeinated drinks, luxury cars, big motorcycles, yachts, private aircraft, arms & ammunition will now be levied with 40% GST.

• The tax on coal, lignite and peat has also been increased to 18%.

The finance minister announced that the compensation cess will now apply solely to tobacco and related products. It will be charged in addition to the 28% GST rate until the pending loan is fully repaid.

She added that the cess will be withdrawn once repayment is completed. Clarifying further, she said the proposed 40% levy on sin goods is outside the regular GST framework and will apply only to tobacco products.

She also added that the state and centre will bear the gains or losses together as a unit.