The GST Council is set to implement a simplified two-slab GST structure of 5% and 18% by September 22, 2025. This move aims to boost festive demand in India, particularly in the auto sector. Here’s what you need to know:
- New GST Slabs: The council proposes a two-rate structure with 5% and 18% slabs, classifying goods and services as ‘merit’ and ‘standard’ categories. A special 40% GST will apply to ultra-luxury cars and sin goods.
- Impact on Vehicles:
- Small Cars: GST may drop from 28% to 18%, making entry-level cars cheaper by Rs 40,000-60,000.
- Two-Wheelers: Commuter-focused models may see stronger demand in rural and semi-urban areas due to lower taxes.
- Luxury Vehicles: May face higher levies due to the new 40% tax bracket.
- Other Changes:
- Essential Goods: Items like medicines, clothing, and footwear may become cheaper.
- Insurance Premiums: May see a reduction from 18% to 5% or nil.
- Food Items: Packaged foods, dairy products, and daily essentials may move to the 5% slab or become tax-free.
- Implementation: The new GST rates are expected to be implemented around September 22, coinciding with the Navratri celebrations.
- Revenue Impact: The government anticipates a short-term dip in revenues, but expects higher compliance and consumption to offset losses.
