The Goods and Services Tax (GST) Council on Wednesday, 3 September, approved wide-ranging reforms designed to simplify the tax regime and reduce the burden on citizens and businesses.
At its 56th meeting, the Council rationalised the four-tier structure into two primary slabs of 5 per cent and 18 per cent, effectively abolishing the 12 per cent and 28 per cent categories.
Essential goods moved to zero GST
A major highlight of the reforms is the expansion of the list of items that will now attract zero GST.
Milk and milk products: Among food products, ultra-high temperature (UHT) milk, chena, and paneer have all been shifted from the 5 per cent category to nil.
Breads: In a significant relief for households, all varieties of Indian bread including roti, paratha, naan and similar products will now be exempt from GST.
Classroom items: Education-related items have also been given full relief. Maps, charts, and globes will be available tax-free, alongside classroom essentials such as sharpeners, pencils, crayons and pastel colours. Exercise books and notebooks, previously taxed at 12 per cent, will now be GST-free, as will erasers, reduced from 5 per cent to nil.
Health Sector: Most importantly, the Council announced the complete exemption of 33 life-saving drugs including cancer medicines from GST, cutting their rate from 12 per cent to zero. The decision is expected to make critical medicines more affordable and accessible to patients across the country.
Also, no GST on individual life insurance and health policies.
Other rate reductions
Beyond zero-rating, several everyday goods have been shifted into the 5 per cent slab. Personal care items such as hair oil, soaps, shampoos and toothbrushes will now attract 5 per cent instead of 12–18 per cent.
Food products including namkeens, pasta, instant noodles, coffee and cornflakes have also been brought under the lower slab. Similarly, butter, ghee, and dairy spreads have seen their rates reduced.
Relief has also been extended to sectors such as agriculture and renewable energy, with bio-pesticides, irrigation equipment, solar heaters, windmills, and photovoltaic cells moved into the 5 per cent bracket. A range of diagnostic kits, spectacles, handicrafts and marble blocks will also benefit from the lower rate.
Higher brackets rationalised
Items previously taxed at 28 per cent, including air conditioners, televisions over 32 inches, small cars, motorcycles below 350cc, tractors, trucks, buses, cement and auto parts, will now fall into the 18 per cent slab. This reduction is expected to stimulate consumption and ease costs for both consumers and businesses.
Meanwhile, so-called “sin and luxury goods” such as pan masala, cigarettes, aerated drinks, large motorcycles, luxury cars, private aircraft and yachts will continue to attract the highest 40 per cent GST rate.
The government framed the reforms as citizen-centric, noting that the rationalisation resolves several longstanding issues, including inverted duty structures and classification disputes. Finance Minister Nirmala Sitharaman stressed that exemptions for health and life insurance policies will make coverage more affordable, while rate cuts for labour-intensive sectors will improve competitiveness.
The reforms set to take effect from 22 September.