NEW DELHI, Sept 3: The GST Council Wednesday gave its nod to a two-tier rate structure of 5 and 18 per cent with the new structure set to implemented from September 22.

Speaking to newsmen, Finance Minister Nirmala Sitharaman said that the main drivers of the economy were the focus of the decision of the Council.

All TVs will now be taxed at 18 per cent tax rate, Sitharaman announced. Life-saving drugs for cancer will now see a nil rate of tax. The inverted duty structure problem will be corrected, she added. Sin goods such as cigarettes and paan masala will attract the highest rate of 40 per cent.

The compensation cess will continue on tobacco and tobacco-related products till “we repay the loan,” the Union Finance Minister said.

Earlier, Bihar Deputy Chief Minister Samrat Choudhary said the decision was consensus-based and all states were on board for the rate rationalisation.

Revenue implication of the tax rationalisation exercise is seen at around Rs 48,000 crore, Revenue Secretary Arvind Shrivastava said. He added that the government believed it would be fiscally sustainable for the government and buoyancy was expected to play a role.

Uttar Pradesh Finance Minister Suresh Khanna said no decision has been taken on the tax incidence on demerit goods, and imposing a levy over and above the 40 per cent would be decided later.

The Cheap, Expensive and Super Expensive

Individual life and health insurance policies, including family floater, and some medicines including anti-cancer drugs, will no longer be taxed. A massive chunk of medical items of regular use -- including thermometer and glucometer -- will be in the 5 per cent tax bracket.

Aspirational items like television, air conditioners and motor bikes under 350 cc will come under the 18 per cent slab. But it would still be cheaper, with the earlier tax slab being 28 per cent.

Small cars -- petrol vehicles up to 1200 cc and diesel vehicles up to 1500 cc -- will also be in the 18 per cent tax bracket. The rest will draw a tax of 28 per cent.

There will also be a sin tax of 40 per cent that would apply to tobacco and tobacco related products, carbonated beverages, mid size and large cars and bikes above 350cc,

The rest of items -- especially daily essentials, like hair oil, shampoo, soap and other toiletries, dairy products and snacks will also be in the 5 per cent bracket.

Relief has been given to the farmer with agricultural implements coming down from 12 per cent to five per cent. Education has also been made more affordable with the tax on exercise books, note books, pencils, erasers and crayons coming down from 12 to 5 per cent.

In a post on X, Prime Minister Narendra Modi said, "During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST. The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and strengthening the economy. Glad to state that @GST_Council
, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government on GST rate cuts & reforms, which will benefit the common man, farmers, MSMEs, middle-class, women and youth".

"The wide ranging reforms will improve lives of our citizens and ensure ease of doing business for all, especially small traders and businesses," he added.