Daijiworld Media Network - New Delhi

New Delhi, Sep 3: The GST Council has approved a major overhaul of India's indirect tax system, simplifying the structure from four tax slabs to a two-tier system of 5% and 18%. The decision was made during a meeting in New Delhi and is expected to come into effect on September 22.

A key outcome of the meeting is the proposal to bring consumer goods like footwear and apparel priced up to Rs 2,500 under the lowest GST bracket of 5%. Previously, this rate only applied to goods priced up to Rs 1,000, with a 12% tax on items costing more.

According to Finance Minister Nirmala Sitharaman, the new structure will make most everyday essentials, medicines, and certain electronics cheaper. Items currently in the 12% slab, such as namkeen and processed foods, will be moved to the 5% bracket, while a large portion of items in the 28% slab, including televisions and air conditioners, will shift to 18%.

The government has also decided to maintain a higher tax of 40% on "sin goods" like cigarettes, tobacco, and sugary drinks, as well as on luxury items, to ensure revenue generation. This reform is in line with Prime Minister Narendra Modi’s Independence Day address, where he outlined a vision for GST focused on structural reforms, rate rationalization, and ease of living.

The changes are intended to streamline the tax system, reduce classification disputes, correct inverted duty structures, and boost economic growth by making consumer goods more affordable. The government projects a short-term revenue loss from the rate cuts, but it anticipates this will be offset by increased consumption and a more efficient tax framework.