The GST Council has slashed India’s GST system from four slabs to just two: 5% and 18%, effective from September 2022. “These reforms have a multi-sectoral and multi-thematic focus, aimed at ensuring ease of living for all citizens and ease of doing business for all,” said Nirmala Sitaraman.
A higher 40 percent “sin and luxury” slab has also been introduced, targeting goods like tobacco and premium items. GST on small cars, motorcycles, and three-wheelers is reduced from 28% to 18%. Tax on daily essentials like butter, ghee, dairy, shampoo, toothpaste, and more has been reduced from 12% to 5%.
The reform is aimed at stimulating consumption and simplifying compliance, with anticipated benefits for households, MSMEs, and overall economic growth. Although the changes may initially reduce revenue—estimated at around ₹48,000 crore—the boost in demand and improved compliance are expected to offset this decline.
“Glad to state that GST Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women, and youth. The wide-ranging reforms will improve lives of our citizens and ensure ease of doing business for all, especially small traders and businesses.” PM Modi shared on X.
