GST 2.0 reforms: Benefit for middle-class and farmers; what gets cheaper and costlier after new tabs?
NEW DELHI: It has been decided to reduce the Goods and Services Tax (GST) slabs from four to two. Union Finance Minister Nirmala Sitharaman said that the proposal was approved by the 56th GST Council meeting. It will come into effect from September 22.
The decision has been taken to discontinue the current 12% and 28% slabs and continue with the 5% and 18% rates. The tax on 99% of products with 12% GST will be reduced to 5%. The tax on 90% of products with 28% tax will be reduced to 18%. 40% GST will be imposed on "luxury and sin goods".
The government hopes that with the tax cut, more products can be sold in the domestic market and the crisis created by the US's 50% import duty can be overcome.
Prices of daily necessities will come down.
Approximately 99% of items currently under the 12% tax will be moved to the 5% tax, and 90% of items currently under the 28% tax will be moved to the 18% category.
- 28% to 18%: AC, washing machine, TV, cement, small cars up to 1200 cc, two-wheelers up to 350 cc, autorickshaw, ambulance
- 18% to 5%: Clothing and footwear worth up to Rs 2500, toothpaste, soap-shampoo, cornflakes, pastries, biscuits, ice cream, mineral water
- 12% to 5%: Tractors, fertilizers, pesticides, butter, dry nuts, salty snacks
Cess may be eliminated
- The cess system may be abolished.
- All food items and textiles, which are spread across various rates, may be taxed at 5%.
- GST on health insurance premiums and life-saving medicines will be eliminated
- 40% tax on luxury items, including large cars
Registration within three days
The meeting reportedly approved proposals to reduce the registration time for MSMEs and startups from 30 days to three days and to introduce automated GST refund for exporters.
Kerala wants compensation for losses due to falling income. The same demand has been raised by the states of Himachal Pradesh, Karnataka, Jharkhand, Punjab, Tamil Nadu, Jammu and Kashmir, Telangana and West Bengal.