How Will Next-Gen GST Reforms Transform Living Standards?

New Delhi, Sep 4 (NationPress) After the Union government unveiled comprehensive next-generation GST reforms aimed at providing relief across multiple sectors, including daily essentials, healthcare, agriculture, education, automobiles, and appliances, External Affairs Minister (EAM) S. Jaishankar praised the initiative. He stated that this move will have a profound effect on the Centre's efforts to enhance ease of living and doing business in the nation.

In a post on the social media platform X early Thursday morning, EAM Jaishankar remarked: "Following PM @narendramodi's Independence Day announcement, the @GST_Council's decision to implement the #NextGenGST today will significantly influence India's ongoing transformation story and the government's initiatives to improve ease of living and business operations. I congratulate PM and FM @nsitharaman on this remarkable accomplishment."

The EAM noted that the GST reforms will greatly impact the country's economic transformation.

He extended his congratulations to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman for announcing reductions in GST rates across various sectors.

In a landmark decision to reform India's indirect tax framework, the GST Council, chaired by Union Finance Minister Sitharaman, approved extensive rate rationalization reforms on Wednesday, reducing the existing four-rate GST structure to merely two slabs—5 percent and 18 percent.

The Council abolished the 12 percent and 28 percent tax slabs, introducing a simplified two-rate system designed to lessen the consumer burden and stimulate economic activity. These reforms will take effect from September 22, starting with adjusted tax rates on essential goods and services.

In response to the announcement, Prime Minister Narendra Modi expressed his support on the social media platform X, stating: “In my Independence Day speech, I discussed our plans for Next-Generation GST reforms. The Union Government has crafted a detailed proposal for broad-based GST rate rationalization and process reforms aimed at enhancing ease of living for everyday citizens and fortifying the economy. I am pleased to confirm that the @GST_Council, which represents both Union and State governments, has unanimously approved the proposals for GST rate cuts and reforms that will benefit the common man, farmers, MSMEs, the middle class, women, and youth. These extensive reforms will enhance the lives of our citizens and ensure ease of doing business for all, especially for small traders and enterprises.”

Finance Minister Sitharaman emphasized on Wednesday that GST reforms aim not only to rationalize rates but also to make structural changes. She noted that the GST Council's decision was reached with full consensus among all ministers.

In many instances, GST rates have been significantly reduced, especially for farmers and essential healthcare products, she stated during a press briefing following the conclusion of the 56th GST Council Meeting.

“PM Modi expressed a desire to deliver the benefits of GST cuts to the public promptly. These reforms are not solely about rate rationalization; they are structural as well. We have addressed the inverted duty structure,” FM Sitharaman remarked.

With tax rates reduced on a variety of items, the reforms promise to make living more affordable, empower small businesses, and enhance India’s self-reliance under the Aatmanirbhar Bharat initiative, according to the Finance Minister.

FM Sitharaman clarified that there is a complete reduction in GST for items used by the common man and the middle class.

The decision was made that GST will be applied on retail sale price (RSP) rather than transaction value for pan masala, gutkha, cigarettes, unmanufactured tobacco, and chewing tobacco, like Zarda.

Changes in GST rates for all goods except pan masala, gutkha, cigarettes, and certain tobacco products will be implemented starting September 22.

The GST Council has made various decisions and recommended measures to facilitate trade.

FM Sitharaman announced that a special rate of 40 percent will be applied solely to pan masala, cigarettes, gutkha, and other tobacco products. Caffeinated and carbonated beverages will also fall under the 40 percent category.

All cars under 1200 cc and motorcycles under 350 cc will incur an 18 percent tax. Hair oil, soap bars, toothpaste, bicycles, and tableware will now be taxed at 5 percent.

GST on agricultural goods like tractors and machinery for soil preparation or cultivation has been reduced from 12 percent to 5 percent.

GST on essential personal care items such as hair oil, shampoo, toothpaste, and dental floss has been cut from 18 percent to 5 percent, directly alleviating monthly expenses for countless households.

Popular ready-to-eat products like namkeens, bhujia, chabena, and mixtures, previously taxed at 12 percent, will now only incur a 5 percent GST, making them more accessible to consumers across all income brackets.

In a public health-oriented move, the Council raised GST on cigars, cigarettes, and all tobacco products to 40 percent, up from 28 percent.

Similarly, all goods containing added sugar, sweeteners, or flavors, including aerated beverages, will now be subject to the 40 percent slab.

This GST overhaul, referred to by experts as a 'next-generation' reform, focuses on three essential pillars as highlighted by PM Modi.