GST 2.0 comes into effect; kitchen staples, electronics, cars to be cheaper from today

The next-gen GST reforms, announced by the central government recently, came into effect on Monday (September 22) with Prime Minister Narendra Modi calling it an important step for India to achieve self-reliance and go “swadeshi”.

In an address to the nation on the eve of the rollout of the new reduced tax rates, Modi said, "GST bachat utsav (savings festival)", coupled with the hike in income tax exemption to Rs 12 lakh given in the Budget, will be a "double bonanza" for people.

"Now, there will now be only 5 per cent and 18 per cent tax slabs in GST. Most everyday items will become cheaper. Food items, medicines, soap, brush, paste, health and life insurance, many such goods and services will either be tax-free or only have 5 per cent GST," Modi said.

Also read: Modi hails 'GST Bachat Utsav', pitches for 'swadeshi' goods

Modi said the cut in GST rates and the hike in I-T exemption limit will help households save Rs 2.5 lakh crore annually.

"Now, the poor, the neo-middle class, and the middle class are receiving a double bonanza. With the reduction in GST, it will be easier for them to fulfil their dreams," Modi said.

Two tax slabs, cheaper goods

In a bonanza to consumers, the GST Council, comprising Centre and states, decided to reduce tax rates on goods and services, from September 22 -- the first day of Navaratri.

Under the revised GST rates, around 375 items, starting from kitchen staples to electronics to equipment will get cheaper.

From Monday, mass consumption items like ghee, paneer, butter, 'namkeen', ketchup, jam, dry fruits, coffee and ice creams, and aspirational goods like TV, AC, and washing machines will become cheaper.

Several FMCG companies have already announced price reductions in view of GST rationalisation.

Also read: India’s GDP puzzle: Robust growth defies its own key indicators

With GST on most drugs and formulations, and medical devices like glucometers and diagnostic kits reduced to 5 per cent, the cost of medicines will come down for the common man. Also, home builders will benefit as GST on cement has been cut to 18 per cent, from 28 per cent.

The government has already directed pharmacies to revise their MRP or sell medicines at a lower rate after taking into account GST cut benefits.

Good news for car buyers

The biggest beneficiary of the GST rate cut is buyers of automobiles, wherein tax rates have been slashed to 18 per cent and 28 per cent for small and big cars, respectively.

Several car companies have already announced reduction in prices.

With regard to services, GST on beauty and physical well-being services, including services of health clubs, salons, barbers, fitness centres, yoga, etc has been slashed from 18 per cent with Input Tax credit (ITC), to 5 per cent without tax credit.

Also read: Banks see spike in car loan cancellations ahead of GST rate cut rollout

Also, daily use products like hair oil, toilet soap bars, shampoos, toothbrush, toothpaste, too are likely to get cheaper as tax on them has been cut to 5 per cent from 12/18 per cent currently.

Other daily use items like talcum powder, face powder, shaving cream, and after-shave lotion too, could see a reduction in prices as GST has come down to 5 per cent, from 18 per cent.

PM's Swadeshi pitch

The prime minister, in his address on Sunday, also made a pitch for the production and consumption of swadeshi or indigenous goods, stating that it will provide the much-needed strength to the country’s prosperity in a similar way it powered India’s freedom movement.

"We have to make every home a symbol of swadeshi. We have to decorate every shop with swadeshi (goods)," he said The roll-out of next-generation GST reforms months after his government raised the income tax exemption on annual earnings of up to Rs 12 lakh will be a “double bonanza” for citizens, helping them realise their dreams by slashing expenditure and increasing savings, he said. Citizens will save Rs 2.5 lakh crore from the twin decisions, he said.

Also read: GST reforms to slash coal tax, lower power cost, says government

He urged states to boost manufacturing and create a conducive atmosphere for investment, saying that when the Centre and states work together, the dream of a self-reliant India will be realised.

Mantra of ‘Naagrik Devo Bhawah’

He had a message for citizens too. It should be the spirit of every Indian that he says with pride that he purchases or sells made-in-India products, the prime minister said, stressing that it will quicken the pace of the country’s development.

In his over 19-minute address, Modi said the revised GST rates reflect his government’s mantra of “naagrik devo bhawah” (citizens are like gods) as it will bring down the price of everyday items besides cutting expenditure in construction and health sectors.

Also read: From 2017 rollout to latest rejig, GST remains repair-in-progress

From tomorrow, it will be like a GST saving festival, he said, adding that it will bring happiness to every family.

"On the first day of Navratri, the country is going to take an important and big step for Atmanirbhar Bharat. With the sunrise tomorrow, the next generation GST reforms will come into effect. A 'GST bachat utsav (savings festival)' will begin tomorrow.

"You will be able to buy things you like more easily. The poor, middle class, neo middle class, youths, farmers, women, traders and shopkeepers will benefit from this," he said.

He congratulated all on the next generation of GST reforms. "These reforms will accelerate India's growth story, increase ease of doing business and attract more investors," Modi said.

When India took a step towards GST reforms in 2017, a new beginning was made to script history, he said.

‘One nation, one tax’ dream

He said GST realised the 'one nation-one tax' dream. Modi highlighted how the web of taxes and tolls had created hardships for businesses and consumers.

Also read: GST 2.0 negates net impact on GDP growth caused by Trump’s tariffs: CEA

He also said the GST move would benefit MSMEs big time and urged the sector to work to restore glory to made-in-India products, noting that goods manufactured in the country were behind its past economic might.

India’s micro, small and cottage industries will have a key role in building a self-reliant India, he said and called for manufacturing as much as possible within the country.

The prime minister also asked people to be more conscious in their choices, noting that they often do not even know the origin of the comb they may carry.

Items of foreign origins have unwittingly become a part of people’s daily lives, he said, exhorting them to ensure that they buy products with an indigenous background.

One should be proud in saying that “I buy swadeshi” or “I sell swadeshi”, he said.

Modi expressed happiness at the business sector "taking a lead" in passing the benefits of the GST rate cuts to consumers.

GST to infuse Rs 2L Cr into economy: FM

Effective September 22, GST will be a two-tier structure wherein majority of goods and services will attract tax of 5 and 18 per cent. A 40 per cent tax will be levied on ultra luxury items, while tobacco and related products will continue to be in the 28 per cent plus cess category.

Also read/watch: GST 2.0, US tariffs could reshape investment and trade dynamics: Josh Felman

Currently, Goods and Services Tax (GST) is levied in 4 slabs of 5, 12, 18 and 28 per cent. Besides, a compensation cess is levied on luxury items and demerit or sin goods.

Finance Minister Nirmala Sitharaman had last week said that the GST reforms will infuse Rs 2 lakh crore into the economy, leaving people with more cash in hand that otherwise would have gone as taxes.

About 99 per cent of goods under the 12 per cent GST slab currently will move to 5 per cent. The rejig will also result in 90 per cent of items under the 28 per cent tax slab coming down to the 18 per cent bracket.