GST 2.0: The Goods and Services Tax (GST) Council is set to revise rates significantly across several industries after approving the two-tier rate structure. From personal care to life-saving drugs, this reform was announced after a day-long meeting in Delhi, headed by Union Finance Minister Nirmala Sitharaman.
With a great focus on the “common man,” these reforms introduced 5%, 12%, 18%, and 40% tax slabs. They are set to take effect from September 22, with an expected loss of Rs 477 billion in revenue. However, travel, gyms, and beauty products are set to become significantly cheaper. Currently taxed at 18%, these products will be shifted to the 5% tax slab, impacting both consumers and suppliers, such as Hindustan Unilever, a major player in the Indian market for this sector.
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GST 2.0: Rate cut on personal care items
The 13-percentage-point dip in rates will have a visible reduction in retail prices starting September 22, just ahead of the festive Diwali season. Aimed at boosting sales and retail revenue, the GST reform is expected to impact India’s fastest-growing online market: the beauty sector.
This shift is marked by products such as shampoo, toothpaste, toothbrushes, face powder, soap, and hair oil, whose slab will be reduced from 18% to 5%. It also comes after the central government aims to boost “vocal for local” initiatives and domestic retail and e-commerce websites. This also includes feeding bottles, umbrellas, and combs, which are subject to a reduced tax rate from 12% to 5%.
Wellness becomes cheaper
A significant category under physical well-being is fitness centres. Taxed at 18%, all services, including health clubs, salons, fitness centres, and yoga, will attract a 5% rate. Calling it a ‘win-win for the beauty industry’, Deepak Gupta, Co-Founder, Style Lounge, told financialexpress.com that, ” For consumers, salon visits instantly become more affordable—self-care no longer feels like a luxury, but an accessible routine.” Commenting on the input tax credit (ITC), Gupta noted that the “costs still stay on our shoulders.” However, the reduced tax rates might amount to increased footfall and returning customers.
Relief for travelers
From restaurants to flights, the GST reform is set to bring down prices significantly with a maximum of 13% cuts. Rationalised hotel tariffs will now be taxed at 12%, seeing a drop from the previous 18%. Rooms offered at less than Rs 1000 per night will become GST-free, and above Rs 7,500 will attract an 18% slab.
Air travel, too, including economy class tickets, will cut down from 12% rates to 5% and business class will remain at 18%. A delight for frequent flyers and those travelling during the festive season, they can now avail of cheaper options.
Products which will become expensive, however, are included under the 40% slab, such as sin goods tobacco, cigarettes, carbonated drinks, along with cars, motorcycles, and aircraft used for personal reasons.