- The government has streamlined the complex four-tier system into two main slabs, 5% and 18%.
- Small cars, hybrid vehicles, and EVs now attract 18% GST (reduced from 28%).
- Individual life and health insurance policies are now GST-exempt, removing the previous 18% tax burden.
In a sweeping overhaul of India’s Goods and Services Tax (GST), the Centre has streamlined the complex four-tier system into two main slabs, 5% and 18%, while introducing a high 40% rate for luxury and sin goods. These reforms aim to boost consumption, provide relief to essential sectors, and simplify the tax regime ahead of the festive season.
Sectors like consumer goods, automobiles, insurance and agri-products are expected to benefit from the GST overhaul. Whereas luxury goods, IT and telecom did not see any major relief.
1. Consumer Goods & Daily Essentials
GST on everyday items, such as personal care (soap, shampoo, toothpaste), packaged foods, medicines, and household staples has been slashed to 5%, down from 12–18%.
Consumers are expected to benefit from lower prices; major FMCG players are expected to see a surge in demand.
2. Insurance & Agricultural Inputs
Individual life and health insurance policies are now GST-exempt, removing the previous 18% tax burden. Insurance becomes more affordable, potentially increasing penetration in underserved segments.
The agricultural sector also benefits as GST on tractors, tyres, fertilizers, and allied machinery has been reduced to 5%.
3. Automobiles & Appliances
Small cars, hybrid vehicles, and EVs now attract 18% GST (reduced from 28%), while EVs retain the favorable 5% slab. Likewise, air conditioners, TVs, dishwashers, and other appliances move from 28% to 18%. Boost for auto and electronics sectors, companies may see sales rise ahead of Diwali.
4. Sin & Luxury Goods
A new 40% slab targets super-luxury goods and sin categories, including cigarettes, pan masala, gutkha, sugary drinks, high-capacity cars, and motorcycles. The move discourages consumption of harmful and luxury goods; higher pricing may temper demand, though inelastic products might retain margins.
5. Construction & Real Estate
With the tax on cement and building materials reduced from higher slabs to 18%, developers can enjoy lower input costs. Slight margin relief, though demand elasticity remains modest, so housing demand may not spike instantly.
6. Telecom, Mobile, & Other Sectors
Though not in the announced cuts, sectors like telecom, smartphones, and two-wheelers had lobbied for reductions (18% to 5–12%). While not fully granted, the restructuring may pave the way for future ease.
7. MSMEs, IT, & E-commerce
Tax simplification helps, but MSMEs still face compliance complexity and input tax credit (ITC) challenges. The IT sector continues to bear higher costs (18% software GST), while e-commerce players grapple with TCS/TDS rules.
