How Are Next Gen GST Reforms a Double Dose of Support and Growth?

New Delhi, Sep 4 (NationPress) Prime Minister Narendra Modi stated on Thursday that the "next generation" GST reforms introduced are a "double dose of support and growth" aimed at advancing India’s development in the 21st century.

The Prime Minister emphasized that these reforms will enhance the quality of life for Indian citizens, providing a fresh impetus for consumption and growth. He noted that the improved ease of doing business will attract more investments and create jobs.

Criticizing previous Congress administrations, he highlighted how they imposed high taxes on essential kitchen items, agricultural goods, and even medicines.

Furthermore, he pointed out that the youth will benefit from lower GST rates on fitness services, including gyms, salons, and yoga centers.

The new reforms represent a significant simplification of the GST framework, set to take effect on September 22. The transition to a two-slab system of 5 percent and 18 percent, eliminating the earlier 12 percent and 28 percent rates, aims to enhance transparency and simplicity in taxation, as per an official statement.

At the same time, a 40 percent tax on luxury and sin goods such as pan masala, tobacco, carbonated drinks, high-end vehicles, yachts, and private planes ensures a fair revenue distribution.

Additionally, the simplification of registration and return filing processes, faster refunds, and reduced compliance costs will ease the operational burden on businesses, particularly micro, small, and medium enterprises (MSMEs) and startups.

A sector-specific analysis of the reforms indicates widespread benefits, including lower prices for goods, increased demand, and accelerated economic growth that will generate more jobs.

The reforms bring tangible savings to households by lowering taxes on daily essentials and packaged foods. The reduction in GST on air conditioners, dishwashers, and televisions (LCD, LED) from 28 percent to 18 percent is a win-win, boosting affordability for consumers while reinforcing India’s electronics manufacturing sector.

Items such as Ultra-High Temperature (UHT) milk, pre-packaged and labeled chena or paneer, and all types of Indian breads will now have zero GST.

Household products like soaps, shampoos, toothbrushes, toothpaste, tableware, and bicycles are now taxed at 5 percent. Food items like packaged namkeens, bhujia, sauces, pasta, chocolates, coffee, and preserved meats have also seen reductions to 5 percent from previous rates of 12 percent or 18 percent.

The reduction in GST on cement from 28 percent to 18 percent and on construction materials such as marble and granite from 12 percent to 5 percent is expected to significantly benefit the housing sector. This will lower housing and infrastructure project costs, making home ownership more accessible, and is also likely to stimulate demand in real estate, creating new jobs in construction.

Improved classification of vehicles and auto parts will minimize disputes, enhance compliance, and foster growth in India’s automotive manufacturing and export sectors. The GST on small cars, two-wheelers under 350cc, buses, trucks, and three-wheelers has been reduced to 18 percent from 28 percent, which will invigorate the automobile industry.

Moreover, the agricultural sector will receive substantial support as the GST on farm machinery is reduced to 5 percent from 12 percent, and lower rates on bio-pesticides will help small farmers lower costs and promote sustainable farming techniques. Correcting the inverted duty structure on fertilizer inputs will bolster domestic fertilizer production and reduce reliance on imports, enhancing self-sufficiency in agriculture.

GST on tractors, harvesters, threshers, sprinklers, drip irrigation systems, and machines for poultry and beekeeping has all been lowered to 5 percent from 12 percent.

In the services sector, reduced GST on hotel stays, gyms, salons, and yoga services will lessen costs for citizens, improve accessibility to wellness, and give a boost to hospitality and service industries. The GST on hotel stays up to Rs 7,500 per day has been cut from 12 percent to 5 percent. Additionally, gyms, salons, barbershops, and yoga services have seen a reduction from 18 percent to 5 percent.

Establishing clear duty structures for man-made fibers will enhance the competitiveness of the textile industry, particularly for exports. The inverted duty structure in this sector has been rectified with a drop in GST rates on man-made fibers from 18 percent to 5 percent and on man-made yarn from 12 percent to 5 percent.

Moreover, lower GST rates on handicrafts will aid artisan livelihoods, safeguard India’s cultural heritage, and promote rural economic development.

Education has also become more affordable, with exercise books, erasers, pencils, crayons, and sharpeners now attracting a 0 percent GST. This directly benefits families and students by lowering the costs of educational materials. Geometry boxes, school cartons, and trays will now incur a 5 percent duty instead of the previous 12 percent.

Furthermore, reduced rates on medicines and medical devices will enhance healthcare access and support domestic manufacturing in the pharmaceutical and medical equipment sectors. The GST on 33 life-saving drugs and diagnostic kits has been reduced to zero.

Other medications, including Ayurveda, Unani, and homeopathy, as well as spectacles and corrective eyewear, have been brought down to the lowest 5 percent bracket.

Additionally, GST exemptions on life and health insurance premiums will extend financial protection and support the vision of Mission Insurance for All by 2047, as stated.