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State Bank of India (SBI) Chairman Challa Sreenivasulu Setty said on Thursday that the government’s move to shift a host of everyday household items to 5 per cent from the 12 per cent slab will provide real relief to the people in the form of enhanced savings and better spending capacities.
His remarks came after the GST Council — the government’s top decision making body for the indirect tax — met for the 56th time, on September 3, approving sweeping tax reforms, simplifying the GST structure with now two instead of the four main rates, and introducing a special 40 per cent rate for sin and luxury goods, like cigarettes and select small cars.
The central government said the new slab system will come into force from September 22, stating that until then, the sin items — including ‘gutkha’ and other tobacco products — will continue to be taxed at their respective existing rates. This period, said the finance minister, would enable the Centre to clear certain compensation cess-related debts with states and UTs.
GST 2.0: 2-slab system to kick in from September 22
The GST Council — headed by the finance minister — did away with the 12 per cent and 28 per cent slabs, shifting the products and services taxed at these rates until now to 5 per cent, 18 per cent or nil taxes.
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The insurance sector will also benefit, with the tax on premiums falling, leading to expanded coverage and higher insurance penetration, said Setty.
Life and health insurance premiums become GST-free
The GST Council decided to make life and health insurance policy premiums GST-free, a move welcomed by investors, reflected in a surge in major insurance stocks on Thursday.
“With the reduction in GST rates, consumer goods will become cheaper, which will also help ease retail inflation (CPI),” added the SBI chairman.
In July, retail inflation — measured by the Consumer Price Index (CPI) — hit an eight-year low of 1.55 per cent, even rosier than the RBI’s 60-basis-point reduction in its FY26 projection to 3.1 per cent.
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Tobacco and gaming face 40% GST, rollout on sin goods deferred
Many experts echoed the view that the GST 2.0 reform will enhance domestic consumption and aid froth in the long run, but it may not be profitable for some businesses.
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