GST Reforms a Diwali Gift for Middle Class
In the current GST structure, the sale of goods and the provision of services are taxed under four different slabs, 5, 12, 18, and 28 per cent.
New Delhi: India’s middle class and common citizens have reason to cheer as Prime Minister Narendra Modi on Friday unveiled next-generation Goods and Services Tax (GST) reforms to reduce the tax burden for taxpayers. Announcing the reforms from the Red Fort on the occasion of the 79th Independence Day, Modi promised a “Diwali gift” for the people in the form of GST changes and lower taxes. “This Diwali, I am going to make it a double Diwali for you. Over the past eight years, we have undertaken a major GST reform, and we are now bringing the next generation of GST reforms. This will reduce the tax burden across the country,” he said.
Hours after Prime Minister Narendra Modi’s announcement on next-generation GST reforms, the government on Friday proposed a two-rate slab under the new Goods and Services Tax (GST) regime, 5 per cent and 18 per cent. Under the revamped system, most items currently in the 28 per cent tax bracket will be moved to the 18 per cent slab, while those in the 12 per cent slab will fall under the 5 per cent slab, top sources said.
In the current GST structure, the sale of goods and the provision of services are taxed under four different slabs, 5, 12, 18, and 28 per cent. “The revamped GST regime will be a game-changer, not only boosting consumption and offsetting revenue loss, but also reducing tax rates for several categories including agriculture, textiles, fertilisers, auto parts, handicrafts, medical devices, and insurance,” the sources added.
According to the proposal, petroleum products will continue to remain outside the GST framework, even under the revamped indirect tax structure. Items and products used in daily life by the common man will be taxed at 5 per cent, while a 40 per cent GST will be levied on tobacco products. “Only around 5–8 luxury items are likely to attract 40 per cent GST, while all remaining items currently in the 28 per cent slab will be shifted to 18 per cent,” the sources said.
