GST reforms: FM Sitharaman announces GST cuts ahead of festive season, what’s cheaper? Check deets

Summary

The Prime Minister's speech on 15th August set the stage for sweeping GST reforms aimed at benefiting the common man. These changes focus on simplifying the GST system with reduced tax slabs, easing business operations, and addressing long-standing issues like inverted duty structures. Key reforms include significant rate reductions on everyday items, agricultural goods, healthcare products, and consumer electronics. The new rates, effective from 22nd September 2025, also introduce a special 40% rate for luxury and tobacco-related items. Additionally, the government has worked on facilitating insurance policies, aiming to make coverage more affordable for the common citizen.

Takeaways

• 😀 The Prime Minister's speech on 15th August set the tone for the reforms aimed at benefiting the people and improving ease of doing business.
• 😀 The GST reform focuses on rationalizing rates, addressing structural issues, and ensuring stability and predictability for businesses.
• 😀 The reforms are centered around common people, with reductions in tax rates for essential goods like hair oil, soap, toothpaste, bicycles, and kitchenware.
• 😀 Items like Indian breads (roti, chapati, paratha) now have a GST rate of zero, while several other food products are reduced to 5% GST.
• 😀 The GST on middle-class goods like air conditioners, large TVs (over 32 inches), and motorcycles (below 350cc) has been reduced to 18%.
• 😀 Agricultural goods, including tractors and machinery for soil preparation and harvesting, have seen a GST reduction from 12% to 5%.
• 😀 Several life-saving drugs and medical equipment, such as diagnostic kits and blood glucose monitors, have seen their GST rates reduced or eliminated.
• 😀 The automotive sector has also seen reductions, with GST rates on small cars, motorcycles, and auto parts lowered to 18%.
• 😀 The correction of inverted duty structures, such as on man-made fibers and fertilizers, will help improve efficiency in these industries.
• 😀 Renewable energy products, including solar panels, windmills, and biogas plants, have seen their GST reduced from 12% to 5%.
• 😀 A special GST rate of 40% has been introduced for sin and luxury goods like tobacco, pan masala, luxury cars, and aircraft for personal use.
• 😀 GST will be levied on the retail price (RSP) for tobacco products, and insurance services related to life and health policies will be exempt from GST to make them more affordable.

Q & A

What was the key focus of the Prime Minister's speech on the 15th of August, according to the transcript?

The Prime Minister's speech emphasized reforms aimed at benefiting the people at the earliest. The focus was on rationalizing GST rates, structural reforms, and enhancing ease of doing business. Key areas included stability, predictability in GST, and reforms that benefit the common man, including reduced taxes on essential items.

What are the main objectives behind the recent GST reforms mentioned in the speech?

The recent GST reforms aim at reducing tax burdens, improving the ease of doing business, ensuring stability and predictability, and benefiting the common man. The reforms also target simplifying registration, return filing, and refunds, alongside correcting inverted duty structures and addressing labor-intensive sectors.

What GST rate changes are being implemented for common man items?

Several common man items have seen a drastic reduction in GST rates, with many moving to a 5% rate. Items like hair oil, soap, shampoos, bicycles, and household products that were previously taxed at 18% or 12% will now be taxed at 5%.

What products will see a complete reduction in GST, according to the announcement?

GST on products like ultra-high temperature milk (UHT), paneer, and Indian breads such as roti, chapati, and paratha will be reduced to zero.

Which consumer electronics were affected by the GST rate change?

Middle-class items such as air conditioning machines, televisions (over 32 inches), and dishwashing machines have had their GST reduced to 18%.

What steps have been taken to benefit the agriculture sector through GST reforms?

The reforms include a reduction in GST rates on agricultural goods. For instance, tractors and agricultural machinery, such as those used for soil preparation and harvesting, have seen a reduction in GST from 12% to 5%. Additionally, biopesticides and natural menthol products have also had their GST reduced.

How have health-related items been impacted by the GST reforms?

Health-related items, including life-saving drugs, medicines for cancer, and chronic diseases, have seen a reduction in GST. Some of these medicines and diagnostic kits are now exempt from GST or taxed at a reduced rate of 5%.

What changes were made to the GST rates for the automotive sector?

The GST on small cars and motorcycles (up to 350cc) has been reduced from 28% to 18%. Similarly, the GST on buses, trucks, ambulances, and auto parts has been standardized at 18%. The rate for three-wheelers has also been reduced to 18%.

What does the correction of the inverted duty structure mean for the textile and fertilizer sectors?

The inverted duty structure has been corrected by reducing the GST rate on man-made fibers from 18% to 5%, and on man-made yarn from 12% to 5%. For the fertilizer sector, the GST on key chemicals like sulfuric acid, nitric acid, and ammonia has been reduced from 18% to 5%.

What special GST rate was introduced for luxury and sin goods?

A special GST rate of 40% has been introduced for luxury and sin goods, including products like pan masala, cigarettes, chewing tobacco, luxury cars (with engine capacities exceeding 350cc), and aircraft for personal use.