On the occasion of Independence Day, Prime Minister Narendra Modi, while addressing the country from the Red Fort, made a big announcement of GST reform. The purpose of this announcement is to speed up the country’s economy and reduce the tax burden on businessmen and common citizens. PM Modi’s speech has indicated that a new tax structure can be implemented before Diwali in the festive season.
Change in GST: 5 slab to 2 slabs
Currently five slabs of GST are applicable in India:
0 percent
5 percent
12 percent
18 percent
28 percent
The government plans to convert it to only 2 slabs, so that the tax system is simple and traders and consumers can get relief. Along with this, the elimination of the cess on common goods is also being considered.
According to government sources, 90 percent of items coming in 28 percent slab will be brought into 18 percent slab. At the same time, 12 percent products will be shifted to 5 percent slab.
What things will be cheap
This improvement will make many essential commodities and services cheaper:
Its shifted from 12 percent to 5 percent:
Medicines
Processed food
Some dairy products
Hotel room
Some construction materials
Objects shifting from 28 percent to 18 percent:
Air conditioners
Refrigerator
Cement
Some services of insurance sector
Four wheelers with engine less than 1200 cc
Two wheel bikes less than 500 cc
Experts believe that this may increase the sales of Maruti Suzuki and Hero Motor Corp in the coming days.
What will increase tax on things
The government also indicated that GST will be increased on harmful and luxury goods, so that social value and revenue structure can be maintained. These include:
Paan masala
Cigarette and tobacco products
Luxury cars
SUV vehicle
online gaming
According to the report of Indian Express, online gaming is placed in this category because it can be considered socially harmful.
New system benefits traders and consumers
Small businesses and MMMEs (Micro, Small and Medium Enterprises) will benefit from the simplification of tax structure.
Common citizens are expected to get cheap goods and low tax rates in everyday needs.
Sale and demand reduced in industrial goods, construction materials and vehicles may increase sales and demands.
History of GST
The GST was first implemented in India on 1 July 2017. Under this, a uniform tax system was implemented across the country by combining the tax imposed by the Central and State Governments. Initially five slab system was adopted, so that equal tax rates on goods and services in all states can be ensured.
