GST Restructuring Plan: Food, Medicines, Phones May Get Cheaper—Luxury Goods To Cost More
India is gearing up for a major overhaul of the Goods and Services Tax (GST) that could change the way citizens pay for daily essentials and services. According to reports, the Finance Ministry has submitted a proposal to the GST Council to replace the current four-slab structure with a simpler two-rate system—5% and 18%.
The move, projected as a step towards simplification, is also being touted as a “Diwali bonanza” for consumers, in line with the Prime Minister’s promise of relief to the common man.
What Could Get Cheaper?
- Processed food items such as butter, ghee, packaged juices
- Mobile phones, which are currently taxed at 12%, may come down to 5%
- Medicines, healthcare services, and insurance premiums are expected to see a rate cut, making them more affordable
- Handicrafts and agricultural equipment, crucial for rural livelihoods, may also benefit from the rejig
Officials believe that these cuts will not only bring relief to households but also boost consumption and GDP growth, while easing compliance for small traders and MSMEs with faster refunds and simpler tax calculations.
What Could Get Costlier?
The restructuring is also expected to hit consumers of certain “sin goods” and luxury products. A special 40% slab is being proposed for items such as:
- Tobacco and cigarettes
- Pan masala
- Other luxury or non-essential goods
The government hopes that this steep tax will both discourage consumption and make up for revenue losses arising from lower rates on essential items.
If approved, the GST rejig will mark one of the most significant changes in India’s indirect tax system since its rollout in 2017.
