In the 56th GST Council Meeting that happened recently, many decisions have been taken to reform India’s indirect tax framework that will enhance growth; this is termed GST 2.0. From replacing the earlier four-rate structure to two standard rates and a special rate for sin goods, the Council has taken some major decisions that should be known to every Indian.
Health and life insurance will be GST-exempt
Items such as food, medicines, and personal care that fall under essential items have been shifted to a lower tax slab, and there has also been a rate reduction in consumer durables like cement, electronics, and small vehicles. Rates are reduced from 28% to 18%. Health and life insurance will be GST-exempt. These changes in slabs will majorly affect middle-income families and lower compliance challenges for MSMEs.
Specific Sector Impact
Vehicle
In order to make personal transportation more accessible, there will be a drastic decline in mass-market vehicle prices. While luxury cars that were taxed at 28% will now be in the 40% GST slab. The compensation cess of 22% has been discontinued, bringing down the tax rate.
EVs
The low 5% GST rate for electric vehicles (EVs) remains the same in order to promote environmentally friendly choices. However, there isn’t clarity on the accumulated compensation cess and how it will be utilized.
Energy
The GST rates on coal, lignite, and peat have been hiked from 5% to 18%. This drastic increase is aimed at meeting the offset revenue losses. But this change in slab will raise input costs for coal-based power generation and result in higher electricity tariffs. There will be an increase in operational costs of coal-based power, such as steel and cement.
Besides this, biodiesel rates have been increased from 12% to 18%. There is no relief to petroleum products; this has been done to curb fossil fuel dependence.
Real Estate
Housing and real estate will be affected in a significant manner. There has been a cut in the rate of cement from 28% to 18%, which will reduce construction costs for both residential and commercial projects. Materials like granite and marble will have a reduced 5% rate. There will be further reductions in renewable energy equipment, which will reduce expenses and make housing more affordable.