GST Reforms: Top 10 FAQs On Tax Cuts Answered — All You Need To Know

GST Council on Wednesday decided on proposals including restructuring tax slabs from four at present to only two — 5% and 18%.The Ministry of Finance has released a list of frequently asked questions following the 56th GST Council meeting.

The revisions in GST rates on goods and services, excluding certain tobacco products, will come into force on September 22, 2025. For specific items like cigarettes, chewing tobacco, and beedi, existing rates will continue to apply until a later date.

• When will the changes in GST rates come into force?

The changes will be effective from September 22, 2025, for most goods and services. However, the new rates for cigarettes and certain tobacco products will be implemented at a later, to-be-notified date.

• What is the new GST rate on small cars?

The GST rate on all small cars has been reduced from 28% to 18%. This applies to petrol, LPG, or CNG cars with an engine capacity up to 1200 cc and a length up to 4000 mm, and diesel cars with an engine capacity up to 1500 cc and a length up to 4000 mm.

• What is the GST rate on medicines?

All drugs and medicines have a concessional GST rate of 5%, except for those specified at a nil rate. This is done to avoid a higher cost of production for manufacturers.

• Why has the GST rate on agricultural machinery been reduced?

The GST rate on agricultural machinery like sprinklers, drip irrigation systems, and harvesting machinery has been reduced from 12% to 5% to provide relief to farmers.

• Has GST been reduced on bicycles and their parts?

Yes, the GST rate on bicycles and their parts has been reduced from 12% to 5%.

• What is the GST rate on beauty and physical well-being services?

Services of health clubs, salons, barbers, fitness centers, and yoga will now attract a GST rate of 5% without an Input Tax Credit (ITC), down from 18%.

• What is the new GST rate on specified actionable claims?

A new GST rate of 40% will apply to all specified actionable claims, including betting, casinos, gambling, horse racing, lottery, and online money gaming.

• What is the GST rate on spectacles and goggles?

Spectacles and goggles for correcting vision now attract a 5% GST, while other types of goggles will continue to be taxed at 18%.

• Why have rates on air conditioners and TVs been reduced?

GST on air conditioners and dishwashers has been reduced from 28% to 18%. All TVs and monitors, regardless of size, will now be uniformly taxed at 18%, a reduction for larger screens that were previously at 28%.

• What is the GST rate on residential accommodations?

Hotel accommodation services where the value of supply is up to Rs. 7500 per day will be taxed at 5% without an ITC, a reduction from 18%.

The changes aim to rationalise rates, correct inverted duty structures, and simplify the tax system. The new rates on most goods and services, including cars, appliances, and essential household items, have been reduced, while a few luxury goods and specified actionable claims have seen an increase.

This tax rejig is expected to impact various sectors, from healthcare to the automotive industry, as well as daily household expenses.