NEW DELHI – Prime Minister Narendra Modi talked to the country and announced a “savings festival” for people in India on Sunday night. He added that the new “Next Gen GST” changes that went into effect today, September 22, will save families a staggering ₹2.5 lakh crore ($30 billion) a year when combined with the changes that were made to the income tax prior.
The new GST system, which went into effect on the first day of the Navaratri festival, is the greatest overhaul to India’s consumption tax since it was first introduced in 2017. The reforms make the tax system easier by changing it from four levels (5%, 12%, 18%, and 28%) to two levels with predominantly 5% and 18% tax rates. There will be a new 40% tax on products that cost a lot of money. Some “sin” commodities, including tobacco, will still be taxed at 28% plus a cess.
What Will Get Cheaper When GST 2.0 Comes Out?
The tax cuts apply to a number of goods and services, which helps a lot of people, especially those who are poor or middle class.
Daily Needs: Many kinds of food, like ghee, paneer, butter, snacks, ketchup, jam, dry fruits, and ice cream, are now less expensive. The tax rate on critical medical products, like diagnostic kits and reagents, has been dropped from 12% to 5%.
Household Goods & Electronics: TVs, air conditioners, and washing machines are now taxed at 18% instead of 28%. The middle class desires these things.
Cars and motorcycles: The new rules have made it cheaper to buy two-wheelers with engines up to 350cc and small cars with petrol engines up to 1200cc or diesel engines up to 1500cc. The tax rates for these cars have dropped from 28% to 18%. On the other hand, the 40% tax category now encompasses high-end automobiles and motorcycles with bigger engines.
Services: Life and health insurance premiums, which are very important services, are now tax-free. This is a tremendous aid to policyholders. Beauty and wellness services, like gyms and salons, now only charge 5% VAT on their prices.
PM Modi’s Plan for a “Indian” Economy
In his speech, PM Modi emphasized that the new tax adjustments would be good for both consumers and India’s economy. He advised people to buy “swadeshi” (locally made) goods and argued that the changes will help the economy flourish, make it easier for enterprises to manage, and attract in investors. He emphasized a lot about how it will help small and medium-sized businesses (SMEs). He stressed that small and medium-sized businesses (SMEs) are what keep the Indian economy humming.
Reactions from politicians and the economy’s future
The ruling party has hailed the measures a great step forward, but the opposition has branded them “a band-aid on deep wounds” and said the government should be sorry for taxing essential goods in the first place. Some members of Congress have called the GST a “Growth Suppressing Tax” and are unsure if the changes that are taking so long will be enough to get the economy going again.
There is a lot of political debate about it, but policymakers are confident that the GST rate cut, which will come around the holidays, would boost the economy and domestic spending. This might help India deal with the impacts of global economic problems, such US tariffs on items that are sent to other countries.