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Finance Minister Nirmala Sitharaman has announced a major change in the Goods and Services Tax (GST) system. She has stated that almost all goods, which were previously taxed at 12%, will now be taxed at 5%. She made this statement while speaking at a business conclave in Chennai on September 14.
The change comes under the new GST 2.0 reforms. This move removes the 12% slab entirely. Now, most common goods are under just two rates: 5% and 18%. Luxury items and harmful products will still face higher taxes. The new rates will start on September 22, just before the start of the festival season.
According to the minister, this reform will lower the prices of many everyday goods and services. Items such as soap, shampoo, toothpaste, hair oil, and shaving cream will now attract only a 5% GST. Food items such as butter, ghee, cheese, namkeens, and many utensils also shift to the 5% slab. The government is working on GST reforms to simplify compliance and boost economic growth.
Even items like feeding bottles, clinical diapers, sewing machines, and stationery have become more affordable. She said this is a step that touches the lives of all 140 crore people in India. People will spend less on daily needs and will have more savings. Businesses will also benefit from simpler rules and clear classifications.
Sitharaman highlighted that GST collections have grown strongly since their launch in 2017. The number of taxpayers increased from 65 lakh to 1.51 crore. GST receipts grew from Rs. 7.19 lakh crore in 2017 to Rs. 22 lakh crore this year. Monthly collections now touch nearly Rs. 2 lakh crore, shared between the Centre and the States.
She also stated that the government worked on GST 2.0 reforms for eight months. The goal was to eliminate confusion over product categories and to expedite registration. The GST Council regularly meets to discuss tax structures and policy updates. Now, registering for GST can be done in just three days. Refunds have also been simplified.
Industry leaders welcomed the move. They believe the lower rates will boost demand and help both consumers and businesses. However, some groups raised concerns. The paper industry is concerned that the GST on paper and paperboard has increased from 12% to 18%. Trader associations also requested action against harassment by tax officials and the implementation of schemes to settle outstanding GST dues.
Businesses are closely monitoring any changes in the GST slab for different goods and services. The Finance Minister said the reform was designed with five goals: to help poor and middle-class families, to support farmers, to reduce raw material costs for MSMEs, to improve daily life, and to boost the economy. This GST reform is expected to be a gift for millions, making goods cheaper, taxes simpler, and businesses easier to run.
Also Read: Will GST Cuts from September 22 Change Prices and Boost India’s Economy?
