Finance Minister Nirmala Sitharaman has estimated the GST reforms will inject about ₹2 lakh crore into the economy by increasing purchasing power among consumers. The changes were approved at a GST Council meeting and timed to coincide with the start of Navaratri.
Under the new regime, the four previous tax slabs—5%, 12%, 18% and 28%—are being replaced for most goods and services by just two primary rates: 5% and 18%. The 40% rate has been introduced for a defined list of luxury and sin goods.
Among the 375 items getting cheaper are daily-use foodstuffs: ghee, butter, paneer, dry fruits, various snacks, jams, ketchup, juices, ice creams, as well as milk-based beverages. Kitchen appliances and electronics such as air conditioners, televisions, washing machines, and dishwashers will also be taxed at the lower rate, moving down from previously higher slabs.
Medical costs are expected to ease: most drugs and formulations, along with diagnostic kits and devices such as glucometers, now attract 5% GST. Over 50 items—including UHT milk, prepackaged paneer, various Indian breads, pizza bread, stationery like notebooks, pencils, erasers and maps—will have nil tax, meaning zero GST.
For homebuyers and construction, the rate on cement has fallen from 28% to 18%. Automobiles too see notable changes: small cars are now taxed at 18%, from the earlier 28%, removing the heavy tax and cess burden that made vehicles significantly more expensive.
Some products are facing higher tax. Soft drinks, aerated beverages, cigarettes and other tobacco products, and large SUVs/MPVs over certain engine sizes will be in the 40% slab. These “sin goods” are being taxed more heavily under the new system.
The reforms aim not just to reduce tax load on the masses but also to simplify GST compliance. Shivani Gupta, a tax analyst, said that reducing the slab structure will help manufacturers and retailers plan pricing more consistently. However, Gupta cautioned that the benefit to consumers depends heavily on whether companies pass on the full impact of tax cuts.
Retailers have already begun adjusting pricing: dairy companies are lowering MRPs of several products; electronics dealers are updating price lists; pharmacies have been directed to adjust medicine prices in line with the lower GST rates.