Finance Minister Nirmala Sitharaman recently shared updates from the GST Council meeting, introducing a new two-tier GST rate system. Starting September 22, the GST will have two rates: 5% and 18%. Importantly, life and health insurance premiums will no longer be taxed under GST. However, tobacco products will face a hefty 40% tax.
What Will Be Cheaper?
Daily essentials like hair oil, shampoos, soap, and ghee will see price drops. The elimination of GST on health and life insurance is a significant relief. Educational materials like maps and pencils will also be more affordable. Additionally, vehicles, including two-wheelers and cars, will cost less. Appliances such as air conditioners and washing machines will experience reduced rates as well.
Political Reactions
Former Finance Minister P Chidambaram criticized these new reforms, calling it a “U-turn” that should have happened years ago. He argued that the GST structure has been flawed since its introduction and expressed frustration over the lack of action for almost a decade.
Expert Insights
Economists believe these changes could boost consumer spending. According to a recent survey, 65% of respondents feel that lower prices will allow them to spend more on necessary items. This could stimulate economic growth, especially during a time when inflation has been a concern.
Historical Context
When GST was first implemented in India, it aimed to simplify the tax system and increase compliance. Over the years, however, many have criticized its complexity and the burdensome tax rates. The current reforms are an attempt to address these long-standing issues.
Overall, while these new GST rates seek to lessen the financial strain on consumers, the debate on their effectiveness continues in the political arena. For more details, you can visit the official government report.
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