GST Council Meeting: What May Get Cheaper Or Cost More Under New Slabs

The Goods and Services Tax (GST) Council, headed by Finance Minister Nirmala Sitharaman, is meeting today amid high expectations from traders and businesses. The 56th meeting of the Council is likely to discuss a shift to a simplified two-slab system and rate cuts that could make several goods and services cheaper ahead of the festive season.

What Is Expected?

Prime Minister Narendra Modi earlier said that traders could expect a "Diwali gift" in the form of GST reforms, with reductions in tax rates across categories. The Council, which includes state and Union Territory finance ministers, is set to deliberate on rationalising the existing four-slab system, 5 per cent, 12%, 18%, and 28%, into a simpler structure.

Possible Rate Changes

According to proposals under discussion, items currently taxed at 28% may be reduced to 18%, while those in the 18% bracket could fall to 12% or even 5%. Goods and services will be broadly classified as 'merit' or 'standard', with the lower rate applying to the latter. A special "sin tax" of 40% will continue for a limited list of products, including tobacco and luxury automobiles.

Sectors That Could Gain

• Automobiles: Small cars under 1200cc engines, motorcycles under 350cc, and auto parts may see GST cut from 28% to 18%.
• Hospitality and Entertainment: Hotel stays and movie tickets could drop from 12% to 5%.
• Healthcare: Cancer drugs may be exempted from GST, with other medicines and essential medical supplies moving from 12% to 5%. Health and life insurance for individuals is also likely to be exempt.
• Daily-Use Goods: Items like paneer, pizza bread, khakra, fruit juices, coconut water, butter, cheese, pasta, and ice cream could become cheaper with rates dropping from 12% to 5% or being exempted entirely.
• Agriculture and Fertilisers: Inputs such as sulphuric acid, nitric acid, and ammonia may be cut from 18% to 5%.
• Textiles: Synthetic yarns, man-made staple fibre yarns, carpets, and handicrafts may move to 5% from 12%.
• Solar cooker: In a big green move, solar cookers are likely to see a cut from 12% to 5%. 
• Stationery: Erasers, which earlier drew a GST of 12%, may be exempted, while maps, charts, notebooks, and atlases may be reduced from Rs 12% to 5%.
• Toiletries: Toothpowders may see a lower GST of 5% from 12%, while toothpaste may be reduced from 18% to 12%. Shampoo, oil, and soap may also be brought in the 5% slab from 18%.
• Umbrella: Likely to be reduced to 5%.
• Hotel booking: The GST on hotel rooms with rent up to Rs 7,500 may be reduced from 12% to 5%.

Who Could Be Affected?

• Luxury and Sin Goods: Tobacco, pan masala, and luxury automobiles may face a new 40 per cent sin tax.
• Electric Vehicles (EVs): While small cars gain, four-wheeled EVs priced between Rs 20-40 lakh could see GST hiked from 5 per cent to 18 per cent, and luxury EVs above Rs 40 lakh may fall under the 40 per cent bracket.
• Coal and Certain Energy Products: Coal may move from 5% to 18% after cess removal, raising costs for power producers and potentially impacting electricity tariffs.
• Apparel: Clothing priced above Rs 2,500 per piece could shift from 12% to 18%.

Economy Impact

Experts suggest that the changes could give a strong push to domestic consumption, particularly among middle-class households, while also supporting private investment. The government hopes the move will boost market activity despite an estimated revenue loss of Rs 50,000 crore.

The new GST rates will likely be in effect September 22 onward, sources told NDTV.