Just before the festive season, the burden on your pocket might get lighter. The GST Council is likely to approve a two-tax-slab structure in its September-October meeting, which could make many everyday items more affordable.
Major GST Overhaul: Two-Slab Plan, What Will Be Affected?
On the 79th Independence Day, Prime Minister Narendra Modi made a significant announcement regarding the Goods and Services Tax (GST). He stated that a major reform is coming to GST this Diwali. The government has proposed a new two-slab GST rate structure. Following PM Modi's announcement, the proposal has been sent to the GST Council. It has also been shared with all states and the 'Rate Rationalization' Group of Ministers (GoM).
Currently, there are four GST slabs: 5%, 12%, 18%, and 28%. The new plan aims to reduce these to just two: 5% and 18%.
Maximum Benefit for the Common Person
This change is expected to benefit the common person the most.
- Most everyday items could be moved into the 5% GST slab.
- The plan is to shift 99% of goods currently in the 12% slab to the 5% slab.
- 90% of goods in the 28% slab could be moved to the 18% slab.
This means that essential items like food, household goods, and other daily necessities could become cheaper.
Relief for Farmers, Students, and the Middle Class
This new proposal also brings significant relief for farmers, students, and the middle class.
- The tax on essential items for farmers, handicrafts, medicines and insurance could be reduced.
- Some goods that were in the 18% slab might be moved to the 5% slab or made tax-free.
- Additionally, there is a proposal to lower GST on items related to rural employment.
This step could help control inflation and increase people's purchasing power.
'Sin Goods' to Be Hit Hard
While the common person will find relief, some specific products may face a higher tax. There's a proposal to impose up to 40% GST on 'sin goods' like tobacco and pan masala. This move is likely intended to discourage the consumption of these products.
When Will the New GST Structure Be Implemented?
The next GST Council meeting is expected to take place in September-October. The government aims to have the new GST structure implemented before Diwali so that people can get a direct benefit during the festive season.
The GST system was implemented on July 1, 2017, and has now completed eight years. According to the Finance Ministry's post on X on August 15, the main goal of these GST reforms is to reduce disputes related to the classification of items and bring stability to GST rates. The ultimate aim is to enhance the 'Ease of Living.'
Q: What are the current GST tax slabs, and what is the proposed change?
A: Currently, there are four GST tax slabs: 5%, 12%, 18%, and 28%. The proposed change is to reduce these to just two slabs (5% and 18%) to simplify the tax system.
Q: Will this change make all goods cheaper?
A: While most daily essentials currently in the 12% slab could move to the 5% slab, 'sin goods' like tobacco and pan masala may see their tax increase to up to 40%.
Q: How will this proposal benefit farmers and students?
A: The proposed changes include a reduction in tax on many essential items for farmers, as well as on medicines and insurance. This is expected to provide financial relief to students and the middle class.
Q: Has this proposal been sent to all states?
A: Yes, the government has sent this proposal to all states and the 'Rate Rationalization' Group of Ministers (GoM) of the GST Council to seek their consensus on the matter.
Q: When was the GST system implemented, and what is its goal?
A: The GST system was implemented on July 1, 2017. According to the Finance Ministry, its goal is to bring stability to tax rates and reduce disputes related to the classification of goods and services.
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