GST Overhaul Simplifies Tax Regime, Cuts Rates Across Sectors

Government aims to boost demand, reduce inflation, and ease compliance for SMEs

New Delhi, Sept 4:

In a move billed as one of the most significant tax reforms since the introduction of GST in 2017, Finance Minister Nirmala Sitharaman unveiled a sweeping GST restructuring designed to simplify rates and provide broad-based relief to consumers and businesses.

Starting September 22, GST will now operate with just two primary slabs—5% and 18%, along with a steep 40% rate for ultra-luxury items such as high-end cars, yachts, and premium jewelry. The reform brings essential items like packaged foods, medicines, toothpaste, and milk-based products into the 5% category, reducing household spending pressure.

Industries such as automobiles, cement, and electronics will see a reclassification to 18%, a shift expected to improve affordability and stimulate demand. Notably, health and life insurance policies will now be exempt from GST, a move welcomed by both insurers and policyholders.

“The new GST framework not only simplifies compliance but also lowers costs for SMEs, startups, and consumers alike,” Sitharaman said, adding that the reform is expected to reduce inflation by up to 1.1 percentage points and provide a fiscal stimulus of nearly ₹48,000 crore.

Industry leaders quickly praised the overhaul. Anand Mahindra, Chairman of Mahindra Group, described it as “a crucial battle won in favor of economic revival,” though he stressed that India must continue down the path of reforms in labor, logistics, and land acquisition.

With festival season approaching, retailers and FMCG companies are gearing up for a surge in demand. Analysts predict that the new GST will help unlock liquidity for small businesses and improve competitiveness for larger enterprises, especially in consumer-focused sectors.