GST On Hotel Room Rent: Hotel rooms with tariffs up to Rs 7,500 per day are set to become cheaper as they will attract a lower GST rate of 5 per cent, without input tax credit (ITC), from September 22, a move expected to boost tourism.

Currently, hotel rooms with daily tariff of up to Rs 7,500 attract 12 per cent goods and services tax (GST) with input tax credit.

New GST Rates

The GST Council on Wednesday cleared sweeping changes to the indirect tax regime, approving an overhaul of rates by limiting slabs to 5 per cent and 18 per cent effective from September 22, the first day of Navaratri.

GST tax rates on common use items ranging from hair oil to corn flakes, TVs, and personal health and life insurance policies were slashed after the all-powerful GST Council on Wednesday approved a complete overhaul of the tangled Goods and Services Tax regime.

The panel approved simplifying the GST from the current four slabs, 5, 12, 18 and 28 per cent, to a two-rate structure, 5 and 18 per cent. A special 40 per cent slab is also proposed for a select few items such as high-end cars, tobacco and cigarettes.

The new rates for all products, except gutkha, tobacco and tobacco products and cigarettes, will be effective September 22 -- the first day of Navratri, she said.

Consumer goods such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see rate cut from 12 per cent to 5 per cent. The rates on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil has been cut down to 5 per cent from 18 per cent.

GST On Health Insurance

Finance Minister Nirmala Sitharaman said all individual life and health insurance policies will now attract nil tax in a bid to boost coverage.

The move to simplify the tax regime, first announced by Prime Minister Narendra Modi in his Independence Day speech, comes as India's exports to the US face a 50 per cent tariff -- the highest in the world.

The Indian economy is heavily reliant on consumption with private consumption accounting for 61.4 per cent of the nominal GDP last fiscal.

The GST reforms are likely to boost the economy by up to 0.5 percentage points by the second year of its implementation, effectively neutralising the full impact of the US tariff, economists told PTI.

Tobacco, gutkha, tobacco products and cigarettes will continue to be charged at current 28 per cent plus a compensation cess till such time that loans taken to pay states for revenue loss is fully paid back, Sitharaman added.

(With agency inputs)