New Delhi: One of the key elements in Prime Minister Narendra Modi’s record 103-minute Independent Day speech was the announcement of a major reform in Goods and Services Tax (GST) regime which would bring relief to consumers and small businesses.
Modi said that the revisions in the GST would be rolled out around Diwali, without specifying details.
PTI reported, citing government sources, that the Central government has proposed two rates – 5% and 18% – under the GST regime. About 90% of taxable items in the existing 28% bracket are likely to be shifted to the 18% slab in the revamped regime.
Common items and daily-use products are likely to be taxed at 5% in the revamped GST system, while a special 40% GST may be applicable on luxury goods.
The government currently levies GST at 5%, 12%, 18% and 28% on most goods and services, excluding gold and silver, and applies an additional tax on items like cigarettes and high-end cars.
Speaking from ramparts of Red Fort on Friday morning, Modi announced a “double Diwali gift” for the people.
“This Diwali, I am going to give you a ‘double Diwali’ gift. A major announcement is coming for the people of the country. Over the past eight years, we implemented a major GST reform that significantly reduced the tax burden across the nation. Now, after eight years, the time has come to review it. We have formed a high-powered committee to begin this review process and have held consultations with the states as well. We are now bringing in next-generation GST reforms. This will become a Diwali gift for the nation,” Modi said.
“Tax rates on essential goods and daily needs will be reduced under a simplified framework. This will bring significant relief and convenience. Our MSMEs and small industries will also benefit greatly from these changes,” Modi added.
The government has previously said that it wants to change GST rates and reduce the number of brackets, referring to tax rates for different categories, under a tax regime introduced in 2017.
The country currently levies GST at 5%, 12%, 18% and 28% on most goods and services, excluding gold and silver, and applies an additional levy on so-called demerit items such as cigarettes and high-end cars.