By now, you must have seen lots of discussions about what goods become cheaper and what is more expensive under the new GST rates announced by the Centre on Wednesday (September 3).Will the new GST rules really make your Diwali brighter? Who benefits the most? The GST cut will mean a revenue loss for the government; what will be the implications of that? And also, what exactly is GST? We answer all your questions, starting from the simplest.What exactly has happened?The Goods and Services Tax Council, in its 56th meeting Wednesday, cleared some reforms to the GST regime. The two main changes are that the four slabs — 5%, 12%, 18% and 28% — have been brought down to two, 5% and 18%, and a new 40% slab has been introduced. As a result of the restructuring, the end price of several frequently consumed items are likely to change from September 22, when the new rates come into effect. The Indian Express has done several stories covering a broad range of goods whose prices will change.In short, common-use items ranging from toothpaste to butter, cheese, condensed milk, pasta, packaged coconut water, nuts, dates and sausages, to air conditioners and TV sets, to smaller cars and bikes, to medical items like gauze, bandages, diagnostic kits will face smaller tax rates.What is GST?The Goods and Services tax was introduced in 2017. It subsumed several state and central-level indirect taxes, such as octroi, luxury tax, value added tax, entry tax, etc., into a single unified structure, where one tax was charged at the destination level. So a manufacturer, the consumer for raw materials, paid a tax while buying them, and the final consumer, you and I, paid the tax when buying the finished product. The manufacturer could claim some credit for the input-stage tax he paid. This also brought more businesses into the formal economy, because it helped to have GST receipts.The reason we pay taxes while buying goods at all is because the government needs revenue, and GST covers a wider base is than just income tax, which a smaller section of the population pays.Why has the government made the GST changes now?Several Opposition leaders and sections of the industry have long demanded GST simplification. However, changes in the slabs would impact government revenue, and it had been holding off. Indeed, Revenue Secretary Arvind Shrivastava has said that the changes could have a net revenue implication of Rs 48,000 crore.Story continues below this adWhat finally convinced the government to go for the changes was the need to boost demand. If goods become cheaper, people are likely to have more money left over, which will drive consumption. This sets off something called a virtuous capex cycle. Basically, more money with people means for demand for goods More demand means more production, so more investment and employment generation on the industry side. More employed people means yet more money to spend, and the cycle continues.However, one point to note here is that the process is not linear. If toothpaste is cheaper, you will not buy three tubes when you need one. But if toothpaste, soap, shampoo, paneer, curd, all become cheaper, you have more money left over to maybe eat out, or travel, or take a gym membership, and the overall demand increases.The government has been making efforts to boost consumption for long to revv up the economy, and the income tax cuts have been a step in that direction. But as we said earlier, GST touches more people than income tax.What are the goods in the highest tax category?Luxury goods like high-end vehicles, and a ‘sin tax’ on things like tobacco products. However, even these don’t automatically become more expensive. Earlier, along with GST, these goods attracted a compensation cess. This cess has been done away with, so their overall tax rate could be lower than earlier.Story continues below this adHowever, GST was raised to 18% from 12% on clothes that cost more than Rs 2,500, so dresses from the premium brands could get pricier. What will the govt revenue loss mean?The government will definitely see its income hit, at a time it may have to extend sops to the sectors hit by US tariffs. However, the hope is that the overall increase in consumption, buoyant consumer sentiment, and the fact that people’s lives will become easier will ultimately bring more gains for the government than the revenue loss.