From groceries to popcorn, how GST 2.0 will affect your food bill

It’s a good time to be a foodie! The GST Council, led by India’s Finance Minister Nirmala Sitharaman, has approved ‘next generation’ reforms, as PM Narendra Modi had earlier called them, to the Goods and Services Tax (GST) structure.

Starting September 22, the GST slab structure will change — there will only be two slabs of five and 18 per cent. Additionally, there will be a 40 per cent tax only for super luxury, sin and demerit goods.

In the revamped GST structure, most daily food and grocery items will fall under the five per cent GST slab with bread, milk and paneer attracting no tax at all. Moreover, eating out will also become cheaper as the GST has reduced.

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The change in the GST structure received high praise from PM Modi, who wrote on X: “During my Independence Day Speech, I had spoken about our intention to bring the next-generation reforms in GST… Glad to state that @GST_Council, comprising the Union and the States, has collectively agreed to the proposals submitted by the Union Government.

“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.

As we await the GST changes to take place, here’s a better look at how your food bill will now drastically change.

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Sitharaman announces next gen reforms to GST

On Wednesday (September 3), the GST Council approved historical changes to India’s GST structure, adopting a five per cent and 18 per cent tax structure and eliminating the 12 and 28 per cent slabs. The GST Council has also introduced a steep 40 per cent rate for sin and luxury goods.

Speaking after the changes, Sitharaman said, “These reforms have been carried out with a focus on the common man. Every tax on the common man’s daily use items has gone through a rigorous review and in most cases the rates have come down drastically. Labour-intensive industries have been given good support. Farmers and the agriculture sector, as well as the health sector, will benefit. Key drivers of the economy will be given prominence.”

These changes will come into effect on September 22, the first day of Navratri, and ahead of the festival of Diwali.

The finance minister also noted, “The honourable prime minister actually set the tone for the next generation reforms on August 15 when he spoke from the Red Fort… This reform is not just on rationalising rates. It’s also on structural reforms. It’s also about ease of living so that businesses can do their business of working together with the GST with great ease. We have corrected inverted duty structure problems, we have resolved classification related issues, and we have ensured that there will be stability and predictability about the GST. Rate rationalisation, of course, we have reduced the slabs: there shall be only two slabs and we are also addressing the issues of compensation cess.”

Prime Minister Narendra Modi too hailed the changes. “The wide ranging reforms will improve lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” he wrote in a post on social media.

Food items get cheaper

The GST reforms will drastically change the prices of food items, bringing much relief to household kitchens.

Food essentials such as milk, specifically ultra-high temperature milk, will now be tax-free (down from five per cent), while condensed milk, butter, ghee, paneer, and cheese have moved from 12 per cent to five per cent or nil in some cases. Parathas and parottas, which earlier drew 18 per cent tax, move to the nil bracket under GST 2.0.

Kitchen staples such as malt, starches, pasta, cornflakes, biscuits, and even chocolates and cocoa products will now attract a five per cent GST from the previous 12-18 per cent. Meanwhile, refined sugar, sugar syrups and confectionery items such as candy and sweets have been moved to the five per cent slab. Earlier, these items attracted an 18 per cent GST.

Beverages such as coffee extracts, tea extracts, soups and plant-based beverages will also become cheaper as they will now have a five per cent GST rather than the 18 per cent tax. However, carbonated drinks and aerated waters will be slapped with a 40 per cent GST from the previous 28 per cent.

Dry fruits such as almonds, pistachios, hazelnuts, cashews, and dates, which earlier in the 12 per cent slab, have been moved to the five per cent slab.

The GST reforms have also resulted in vegetable oils, animal fats, edible spreads, sausages, meat preparations, fish products, and malt extract-based packaged foods all being moved to the five per cent slab.

Processed foods like pickled vegetables, pickled fruits, frozen vegetables, jams, jellies, marmalades, sauces, soups, broths, mayonnaise, salad dressings will also fall in the five per cent slab from September 22.

Your favourite snack such as namkeens, bhujia and other edible preparations, which are ready for consumption, pre-packaged and labelled, will also now attract a five per cent GST from the earlier 18 per cent.

And what about popcorn, which had become a hot topic of discussion last year when the Centre introduced different tax rates for different types of popcorns? Now, as per the new GST reforms, popcorn mixed with salt and spice will attract five per cent tax, irrespective of whether it is sold loose or pre-packed. Earlier, salted popcorn, which was pre-packed, attracted a 12 per cent tax. Meanwhile, caramel popcorn will continue to be taxed at 18 per cent.

Similarly, the GST on cream buns has been revised to five per cent from the earlier 18 per cent. Earlier, there was confusion on cream buns as they were taxed 18 per cent, but buns and cream were separately taxed at 5 percent.

Eating out to get cheaper

And it’s not just kitchen essentials that will become cheaper owing to the GST reforms. Eating at restaurants will also become cheaper as the GST has been brought down to five per cent.

This means any family that spent an average of Rs 3,000-Rs 4,000 a month will now save Rs 200-400 a month. This is significant as the reforms come as the festive and wedding season approaches.

All in all, GST 2.0 will make daily meals a cheaper and more affordable option in India. Go grab that bucket of popcorn and celebrate the news!

With inputs from agencies