Prime Minister Narendra Modi, while addressing the nation from the Red Fort on the occasion of the 79th Independence Day on Friday, promised next-generation GST (Goods and Services Tax) reforms ahead of Diwali, calling it a major gift to the people during the festive season.
The government has proposed to change the slabs of the Goods and Services Tax (GST) to only 5% and 18% for most of the products, except for a special 40% rate on luxury and sin goods like tobacco, reported news agency PTI citing sources. In the proposed new structure, which could be in place after Diwali this year, most of the daily-use products will be taxed at 5 per cent, the sources told PTI.
They added that about 90% of taxable items in 28% bracket will be shifted to 18% tax slab, whereas 99% of items in the current 12% GST tax slab will be moved to 5% bracket in the revamped GST regime. This means that the 12% and 28% tax brackets will most likely be done away with in the revamped regime.
Furthermore, according to the report, petroleum products will continue to remain outside the GST regime even in the new structure.
What PM Modi Said
In his independence day speech, PM Modi on Friday said the Centre has discussed with states the proposal and that the country will “usher in next generation GST reforms by Diwali, which will be a Diwali gift for citizens.” He said that tax on items of common man will be reduced substantially and MSMEs will benefit hugely.
“Now, the time has come for a review…Daily use items will become cheaper, which will also strengthen our economy,” Modi said.
Introduced in 2017, the GST reform was touted as a historic milestone to strengthen the country’s economy. Now, the government is preparing to roll out the next generation of GST reforms to accelerate the vision of an ‘Atmanirbhar Bharat’.
The focus of these reforms will be on three major pillars – structural reforms, rate rationalization and ease of living, the Finance Ministry said in a statement.
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Pillar 1: Structural reforms
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