GST reform: 5% and 18% slabs, 40% special rate for sin & luxury items

The GST Council, chaired by Finance Minister Nirmala Sitharaman, on Wednesday approved a wide-ranging overhaul of India’s goods and services tax, replacing the current four-tier system with a two-rate structure of 5 percent and 18 percent and creating a 40 percent special rate for designated sin and ultra-luxury items. The decisions were taken at the council’s two-day meeting in New Delhi and will take effect for most items from September 22, officials said.

Under the package, most items currently in the 12 percent slab will move to 5 percent and the bulk of the 28 percent category will shift to 18 percent, with government briefings saying roughly 99 percent of items in the 12 slab and about 90 percent of those in 28 will be reassigned. The council also approved full GST exemption for individual life and health insurance premiums, faster registration for low-risk micro and small businesses, and measures to speed provisional export refunds and clear stuck shipping bills, officials added.

The fiscal impact of the changes was disputed. Revenue officials and the finance ministry signalled that the reforms would be fiscally manageable, with one government estimate cited at about Rs...