New Delhi: The government's overhaul of the Goods and Services Tax (GST), known as GST 2.0, has officially come into effect today (September 22). This marks the second big reform since GST was introduced in 2017, and brings in a slew of tax rate cuts and policy shifts across a wide range of sectors.
From insurance exemptions to FMGC price drops, here are 10 key reforms under GST 2.0 that businesses and consumers must know about:
1. Life Insurance Now GST-Free
All individual life insurance products, including term insurance, endowment policies, and ULIPs, are now exempt from GST. This exemption also extends to the reinsurance of these policies.
2. Health Insurance Exempted
Individual health insurance policies, including those for families and senior citizens, are now fully exempt from GST. This move is aimed at making health cover more affordable for the general population.
3. Changes in Passenger Transport Taxation
Road passenger transport continues to attract 5% GST without input tax credit (ITC). Operators have the option to pay 18% with ITC. Air travel remains taxed at 5% for economy class and 18% for premium classes.
4 GST on Local Delivery Services
Local delivery services offered via e-commerce platforms by unregistered providers will see the GST liability shift to the e-commerce operator. Registered service providers will remain responsible for their own tax payments. These services are taxed at 18%.
5. No Full GST Exemption for Medicines
Medicines continue to be taxed at 5%. The Finance Ministry clarified that exempting them entirely would "prevent manufacturers from claiming ITC on inputs", thereby increasing production costs.
6. Leasing and Renting Goods
The GST rate on leasing or renting goods without an operator will match the GST rate applied on the sale of those goods. For instance, leasing a car without a driver will attract the same 18% rate as its sale.
7. Revised GST Rates Apply to Imports
From today, integrated GST (IGST) will be levied at the new revised rates under GST 2.0 for all imports, unless a specific exemption has been announced.
8. Tax Structure for Milk Products
UHT (Ultra High Temperature) milk from dairy sources is now fully exempt. In contrast, plant-based alternatives like almond, soy, and oat milk will be uniformly taxed at 5%, down from the previous 12% to 18%.
9. Reduced GST on Personal Care Products
Rates on items such as face powders and shampoos have been cut. The Finance Ministry said that the decision aims to streamline the tax structure, not favour large companies.
10. Price Cuts Across FMCG Sector
Major FMCG players including Dabur, Nestlé, ITC, and HUL have slashed prices in response to the new tax structure. For example, Dabur’s Real Juice (1L) is now priced at Rs 122, down from Rs 130. Similarly, Nestlé has reduced the price of Nescafé Classic (45 gm) to Rs 235, cutting Rs 30 off. These reductions are expected to boost consumption ahead of the festive season.
With GST Council's September 4 decision now in force, the simplified two-tier tax structure of 5% and 18% replaces the earlier 5%, 12%, 18% and 28% slabs. Ultra-luxury items will attract a 40% rate, whole sin goods like tobacco will continue to draw 28% plus cess.
