Speaking at a press conference after a marathon GST Council meeting, Finance Minister Nirmala Sitharaman defended the new tax structure and hit back at the Congress for raising questions on the special 40 percent slab.
“Is the Congress Party demanding a 5 percent tax on tobacco and gutkha? Congress Party wants us to give it at 5 percent,” she said, adding that the Opposition had once dismissed GST as “impossible to implement” but is now criticising reforms under the Modi government.
She further said, “MSMEs and labour-intensive units also get relief, due to which there will be easy compliance. Congress should decide whether it wants to oppose or support the issues that are in the interest of the people. People will expose you.”
The GST Council, chaired by Sitharaman, approved a major restructuring of the tax system by collapsing the earlier four slabs, 5 percent, 12 percent, 18 percent, and 28 percent—into two principal rates of 5 percent and 18 percent.
A new 40 percent slab was carved out specifically for luxury and harmful products like tobacco, gutkha, and high-end cars. Sitharaman clarified that these items would remain under the “compensation cess” category and would not be treated at par with general-use goods.
“All decisions were unanimous, with no disagreement from any state,” the Finance Minister said.
The revamped GST rates slash taxes on a wide range of personal care and consumer goods.
Hair oil, shampoos, soaps, toothpaste, toothbrushes, talcum powder, shaving products, candles, and safety matches now attract just 5 percent GST, down from 18 percent.
Stationery items including notebooks, pencils, sharpeners, erasers, and toys will get cheaper, along with sports goods, handicrafts, and bamboo or cane furniture.
Tooth powder, feeding bottles, kitchenware, bicycles, umbrellas, and combs have been reduced from 12 percent to 5 percent.
Healthcare costs also received relief, with all individual life and health insurance policies now tax-free.
In a significant consumer-friendly move, common use food items have seen a sharp reduction in GST rates.
Essentials like butter, ghee, condensed milk, dry nuts, sausages, jams, fruit juices, namkeens, and sugar confectionery will now attract 5 percent GST instead of 18 percent.
All forms of chapati and paratha are exempted entirely, moving from 5 percent to nil.
Popular breakfast items like corn flakes and cereals also benefit from the new 5 percent tax rate.
With the changes set to take effect from September 22, the first day of Navratri, the timing is widely seen as strategic. The reform is designed not just to ease consumer costs but also to project the government’s commitment to middle-class relief, domestic industry, and public health ahead of key state elections.
“Those items currently under compensation cess have already been proposed at 40 percent because they fall under the category of sin goods,” Sitharaman reiterated, stressing that the government would not dilute its stance on tobacco and gutkha.
