In a landmark initiative aimed at alleviating financial pressure on households, farmers, businesses, and the healthcare sector, Finance Minister Nirmala Sitharaman revealed substantial reductions in Goods and Services Tax (GST) rates on a variety of essential goods, vehicles, agricultural inputs, and electronic devices. Dubbed the 'Next-Gen GST Reform,' this announcement is being celebrated as a historic Diwali gift to the nation, anticipated to lower living costs and stimulate economic growth.

During the 56th GST council meeting, it was decided to streamline GST rates into two categories: 5 percent and 18 percent, effectively merging the previous 12 percent and 28 percent rates. Everyday items such as hair oil, shampoo, toothpaste, toilet soap, toothbrushes, and shaving cream will now be taxed at just 5 percent, down from 18 percent. Additionally, products like butter, ghee, cheese, dairy spreads, packaged snacks, utensils, baby feeding bottles, diapers, and sewing machines will also see their GST reduced to 5 percent from the earlier 12 percent.

To enhance healthcare affordability, the GST Council has eliminated GST on individual health and life insurance policies, reducing the rate from 18 percent to zero. Medical supplies such as thermometers, medical-grade oxygen, diagnostic kits, glucometers, test strips, and corrective spectacles will now be taxed at 5 percent, easing the financial burden on patients and healthcare providers.

The government is also prioritizing support for farmers and the agricultural sector. GST on tractor tires, parts, and specific agricultural machinery used for soil preparation, cultivation, harvesting, and threshing has been lowered to 5 percent from 18 or 12 percent. Furthermore, drip irrigation systems, sprinklers, bio-pesticides, and micronutrients will now fall under the 5 percent GST category, helping to reduce farmers' input costs.

Automobiles are set to become more affordable as well, with GST on petrol, LPG, and CNG hybrid cars (up to 1200 cc and 4000 mm) reduced from 28 percent to 18 percent. Diesel hybrid cars (up to 1500 cc and 4000 mm), three-wheelers, motorcycles (350 cc and below), and goods transport vehicles will also see their GST cut to 18 percent from the previous 28 percent.

The education sector will benefit from the removal of GST on items such as maps, charts, globes, pencils, sharpeners, crayons, pastels, exercise books, notebooks, and erasers, making these essential supplies tax-free.

Electronic appliances, including air conditioners, televisions, monitors, projectors, and dishwashers, will now be taxed at 18 percent, down from 28 percent. Prime Minister Narendra Modi emphasized that these new GST rates are designed to benefit all citizens, stating, 'Taxes for the general public will be significantly reduced. Our MSMEs and small entrepreneurs will gain immensely. Everyday items will become more affordable, providing a boost to the economy.'

The government has also implemented process reforms, such as automatic registration within three working days and expedited refunds through a system-based risk evaluation. The net revenue impact from the GST rate rationalization is projected to be Rs 48,000 crore for the government.