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GST rates before vs now: What has changed in 5 simple points
Under new tax reforms, government has simplified GST by introducing a two-rate structure of 18 per cent and five per cent.
Diwali came in early for consumers in India as government's Goods and Services Tax reforms (GST reforms or GST rate cuts) came into effect from Monday, September 22 – coinciding with first day of the Navratri festival. Under the GST reforms, the previous four-tiered tax rate structure has been revised into what government says is a citizen-friendly ‘simple tax’ – two-rate structure of 18 per cent and five per cent.
Called the “next-generation GST reforms”, these revisions were announced by Prime Minister Narendra Modi from the ramparts of Red Fort on Independence Day, August 15. Follow GST news live updates
The government of India says the GST reforms represent a strategic, principled, and citizen-centric evolution of a landmark tax framework, which will enhance the quality of life of every last citizen.
What changes in GST rates | Then vs now in 5 points
1. From four slabs to two plus one super-slab
Before, there were four main GST slabs — five per cent, 12 per cent, 18 per cent, and 28 per cent.
Now, under GST 2.0, most goods and services are taxed at just five or 18 per cent. Only “luxury” or “sin” goods – pan masala, tobacco, aerated drinks, high-end cars, yachts etc. – have a higher rate of 40 per cent.
“The latest reforms mark a major simplification of the GST structure. The shift to a two-slab system of 5% and 18%, removing the earlier 12% and 28% rates, will make taxation more transparent and easier to follow. At the same time, a 40% on luxury and sin goods such as pan masala, tobacco, aerated drinks, high-end cars, yachts, and private aircraft ensures fairness and revenue balance. Alongside, registration and return filing have been simplified, refunds made faster, and compliance costs reduced, easing the burden on businesses, especially MSMEs and startups,” according to a PIB release.
2. More items moving to lower rates or zero tax
Goods that were earlier taxed at 12 per cent or 18 per cent – especially daily essentials such as food, dairy, medicines, household items – are now mostly shifted into the 5 per cent bracket or even zero tax in some cases.
Among items that now attract zero GST are Ultra-High Temperature (UHT) milk, prepackaged and labelled chena or paneer; all the Indian breads (Chapati or roti, paratha, parotta, etc) as well as over 33 life-saving drugs.
GST has been reduced from 28 per cent to 18 per cent on air-conditioning machines, TVs~32 inch (all TVs now at 18 per cent), dishwashing machines, small cars, motorcycles equal to or less than 350 CC.
3. No tax on health and life insurance
Apart from small cars, TVs, ACs, some of the most attractive reductions in the GST reforms also hotel accommodations. GST has been from reduced 12 per cent to five per cent on “hotel accommodation” services having value less than or equal to Rs. 7,500 per unit per day or equivalent.
All individual health and life insurance are also now exempt from GST, while tax has been reduced from 18 per cent to five per cent on beauty and physical well-being services including services of gyms, salons, barbers, yoga centres, etc.
4. Some items now more expensive
Not all are benefits. As mentioned above, items categorised as “sin” – tobacco, aerated drinks – ultra-luxury items, and large vehicles or bikes are now taxed at 40 per cent, which is higher than before.
The 40 per cent GST is on goods such as pan masala, tobacco, aerated drinks, high-end cars, yachts, and private aircraft ensures fairness and revenue balance.
5. Number of items benefitting
Around 375 items are getting cheaper due to the changes in the GST slabs. Over 50 items have moved into the zero GST bracket.
Full list of items and their GST changes can be accessed here.
