What You Need to Know About the New GST Rate Cuts Starting September 22

Significant GST Reductions on Essential Goods and Services

New Delhi: Starting Monday, consumers will benefit from lower prices on a variety of goods and services as the GST rates on approximately 375 items are set to decrease.

In a move to ease the financial burden on consumers, the GST Council, which includes representatives from both the Centre and the states, has opted to lower tax rates effective from September 22, coinciding with the beginning of Navaratri.

Everyday items such as ghee, paneer, butter, snacks, ketchup, jams, dry fruits, coffee, and ice creams will see price reductions, along with aspirational products like televisions, air conditioners, and washing machines.

Numerous FMCG companies have already begun announcing price cuts in response to the GST adjustments.

The reduction in GST on most medications and medical devices, including glucometers and diagnostic kits, to 5% will make medicines more affordable for the average consumer. Additionally, home builders will benefit from a decrease in GST on cement, which has been lowered from 28% to 18%.

Pharmacies have been instructed to adjust their maximum retail prices (MRP) or offer medicines at reduced rates reflecting the benefits of the GST cuts.

Automobile buyers will be among the biggest beneficiaries, as tax rates for small and large cars have been reduced to 18% and 28%, respectively, prompting several car manufacturers to announce price reductions.

In terms of services, the GST on beauty and wellness services, including health clubs, salons, barbers, and fitness centers, has been cut from 18% with Input Tax Credit (ITC) to 5% without tax credit.

Commonly used products such as hair oil, soap bars, shampoos, toothbrushes, and toothpaste are also expected to become cheaper, with GST reduced to 5% from the previous rates of 12% or 18%.

Other daily essentials like talcum powder, face powder, shaving cream, and aftershave lotion will also see price drops as their GST has been lowered to 5% from 18%.

From September 22, the GST structure will consist of two main tiers, with most goods and services taxed at either 5% or 18%. A 40% tax will apply to ultra-luxury items, while tobacco products will remain in the 28% plus cess category.

Currently, the Goods and Services Tax (GST) operates under four slabs: 5%, 12%, 18%, and 28%, with an additional compensation cess on luxury and demerit goods.

Finance Minister Nirmala Sitharaman stated last week that these GST reforms are expected to inject Rs 2 lakh crore into the economy, providing consumers with more disposable income that would otherwise have been paid in taxes.

Approximately 99% of goods currently taxed at 12% will transition to the 5% bracket, while 90% of items under the 28% slab will shift to the 18% category.