In a major overhaul of the Indian taxation system, the GST Council has approved sweeping rate cuts that will take effect from September 22, coinciding with the first day of Navratri. Union Finance Minister Nirmala Sitharaman announced the landmark reforms following the 56th GST Council meeting on Wednesday, describing it as the biggest reform in the GST regime since its introduction on July 1, 2017. She emphasized that the changes were aimed at benefiting the common man and could have a significant positive impact on GDP growth. "I think it will have a very positive impact on the GDP," Sitharaman said when asked about the consequences of the rate rationalization.

Previously, GST was levied under four different slabs: 5 per cent, 12 per cent, 18 per cent, and 28 per cent. The Council has now simplified the system by eliminating the 12 per cent and 18 per cent brackets, creating a two-tier structure of 5 per cent and 18 per cent. Officials stated that this move will reduce confusion, improve compliance, and make taxation easier for both businesses and consumers. Essential and everyday-use items will see substantial relief under the new structure.

For luxury and sin goods, the GST Council has introduced a new demerit rate of 40 per cent, ensuring that premium and harmful products continue to attract higher taxes. Sin goods, defined as products harmful to health, society, or the environment, will now be taxed at 40 per cent on retail prices instead of ex-factory prices. This includes pan masala, gutka, cigarettes, bidi, chewing tobacco, other tobacco products, carbonated beverages, caffeinated drinks, cigars, cheroots, cigarillos, and all types of aerated water. The 40 per cent GST rate will also cover products containing tobacco or nicotine substitutes designed for inhalation without combustion.

Other non-essential high-value items included in the 40 per cent slab are helicopters, yachts, motorcycles with an engine capacity above 350 cc, and mid-size and large cars exceeding 1500 cc or 4 meters in length. These measures ensure that essential goods are affordable while luxury and harmful items remain appropriately taxed.

Union Home Minister Amit Shah lauded Prime Minister Narendra Modi for the reforms, calling it a "historic decision" that will bring relief to the poor, middle class, farmers, MSMEs, women, and youth. Sharing his thoughts on social media, Shah said, "PM Narendra Modi Ji stands for what he commits. This historic decision of GST rate cuts and process reforms will bring huge relief to the poor and middle class, while also supporting farmers, MSMEs, women and youth." He also praised the introduction of a simplified GST registration scheme aimed at easing compliance for businesses.

Sin/High-Tax Goods (40% GST):

• Pan masala

• Gutka

• Cigarettes

• Bidi

• Chewing tobacco

• Other tobacco products

• Tobacco or nicotine substitutes for inhalation without combustion

• Carbonated beverages

• Caffeinated drinks

• Cigars, cheroots, cigarillos of tobacco or tobacco substitutes

• All types of aerated water

Luxury/High-Value Items (40% GST):

• Helicopters

• Yachts

• Motorcycles with engine capacity above 350 cc

• Mid-size and large cars (vehicles exceeding 1500 cc or length exceeding 4000 mm)