NDTV Explains: What's Cheaper Under GST 2.0 Reforms

India's 'GST 2.0' overhaul begins today, promising widespread economic benefits

The restructured GST system comes into effect from Monday (Representational Image)

New Delhi:

Starting today, India implements a comprehensive restructuring of its Goods and Services Tax (GST) system, dubbed by government officials as "GST 2.0." This significant reform, launching on the first day of Navaratri, aims to deliver benefits across households, businesses, and service sectors nationwide.

The GST Council, comprising representatives from both central and state governments, has approved a rationalization of tax rates, reducing levies on hundreds of essential and commonly used items. Consumers will immediately notice changes at supermarkets, pharmacies, automobile showrooms, and across healthcare, insurance, and education sectors.

According to Finance Minister Nirmala Sitharaman, this restructuring is expected to inject approximately Rs 2 lakh crore into the economy.

What Becomes More Affordable Under GST 2.0

Everyday Essentials and Food

Zero tax: Chapati, paranthas, UHT milk, paneer (chena), khakra, and pizza bread.

5 per cent tax: Butter, ghee, dry fruits, cheese, sausages, meat, jams, ketchup, confectionery, biscuits, breakfast cereals, ice cream, coffee, fruit juices, and plant-based or soya milk.

The reduction from 18 per cent to 5 per cent is projected to substantially reduce household expenditure.

Healthcare

Nil tax: Life and health insurance premiums - addressing a long-standing consumer demand.

5 per cent tax: Life-saving drugs, medical devices, thermometers, oxygen, diagnostic kits, glucometers, corrective spectacles.

Pharmacies have been instructed to update MRPs and ensure consumers immediately benefit from these reductions.

Automobiles and Transport

18 per cent tax: Small cars (under 1200cc petrol, LPG, or CNG, and up to 1500cc diesel), motorcycles up to 350cc, auto components.

5 per cent tax: Electric vehicles.

28 per cent tax: Larger cars and SUVs, though this represents a reduced burden compared to previous tax slabs.

Automobile manufacturers have already begun announcing price reductions across various models to capitalize on festive season demand.

Consumer Electronics and Appliances

18 per cent tax: Televisions, dishwashers, washing machines, refrigerators, and air-conditioners, reduced from 28 per cent.

This rationalization is expected to boost purchases as the Diwali season approaches, with retailers adjusting prices to attract middle-class consumers.

Education and Stationery

Zero tax: Pencils, sharpeners, crayons, exercise books, erasers, maps, charts, and globes.

5 per cent tax: Footwear and textiles.

Personal Care and Household Goods

5 per cent tax: Toothpaste, toothbrushes, talcum powder, shaving cream, hair oil, soaps, toilet bars, face powders, after-shave lotions, utensils, kitchenware, umbrellas, bicycles, and bamboo furniture.

These items previously attracted 12 per cent or 18 per cent tax rates.

Beauty, Fitness, and Lifestyle Services

5 per cent tax: Spas, salons, gyms, yoga centres, and health clubs - previously taxed at 18 per cent. However, these services will no longer be eligible for input tax credit.

Construction and Machinery

18 per cent tax: Cement, reduced from 28 per cent.

5 per cent tax: Agricultural machinery, fertiliser inputs, biopesticides, tractor components, trailers, and sewing machines.

The construction industry, which had strongly advocated for lower GST on cement, is expected to welcome this change as it could potentially reduce housing costs.

Services Sector Changes

The services sector also sees rationalization of rates:

Hotels and travel: Economy flight tickets and hotel rooms priced up to Rs 7,500 per night will attract 5 per cent GST.

Transport insurance: Third-party insurance for goods vehicles now carries a 5% GST rate.