Early Diwali

Sukumar Sah

In what is being hailed as the most sweeping reform of the indirect tax system since its inception, the GST Council, headed by Finance Minister Nirmala Sitharaman, approved a major revamp of rates across goods and services.

The changes involve restructuring of the existing four rates into two – 5 per cent and 18 per cent – while retaining a steep 40 per cent levy for super luxury and so-called ‘sin goods’.

The new regime will take effect from September 22, coinciding with Navratri, with the Government pitching it as a ‘Diwali bonanza’ for households, middle class and farmers. Prime Minister Narendra Modi hailed the GST Council’s decision, saying the reforms would benefit every section of society by lowering costs and reducing compliance burdens.

The most immediate relief will be felt by households. Everyday items such as toothpaste, hair oil, soap, shampoo, butter, paneer, packaged drinking water and cereals will now fall in the nil or 5 per cent bracket. Kitchen staples like jams, juices and ready-to-eat packaged food have also seen rates cut. Consumer appliances – televisions, air-conditioners, dishwashers and small cars – have been shifted to 18 pc slab from the earlier 28 pc, sharply reducing costs for middle-income buyers. Healthcare has received substantial relief. Life and health insurance policies are now GST-free, while life-saving medicines, diagnostic kits, oxygen and spectacles have been exempted or brought under 5 per cent GST.

Officials said the move is designed to ease pressure on household budgets and revive consumer confidence at a time when global turbulence is threatening to dent incomes. For the middle class, squeezed by inflation and uneven job creation, the reforms bring wide-ranging benefits. Hotel-stays under Rs 7,500 and economy air tickets will now be cheaper, while rate cuts on textiles, footwear, shampoos and cosmetics are expected to stretch urban family budgets further. Small cars, hybrid vehicles and motorcycles under 350 cc will also attract just 18 pc GST. Industry leaders said this could trigger a consumption cycle in autos and consumer goods, sectors that account for large employment.

Farmers and the rural economy are set to gain significantly. Agricultural machinery – from tractors and threshers to irrigation pumps – will now attract only 5 pc GST. Fertiliser inputs such as sulphuric acid, nitric acid, ammonia, along with biopesticides and micronutrients, have been moved to the same lower bracket.

Officials said the cuts are aimed at easing farm input costs, improving rural purchasing power and reviving demand for FMCG products and two-wheelers. “This is a bottom-up growth stimulus,” a senior Finance Ministry official said.

The timing of the move carries political overtones. With several state elections due, a tax package that makes food, medicines, housing material, farm inputs and small vehicles cheaper – while retaining punitive levies on luxury cars, aerated drinks and gambling – is likely to resonate widely with voters.

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